Equity Bank is set to be the next beneficiary of a $50 million (Sh5.3 billion) loan from the International Financial Corporation (IFC). Equity has said the loan will be offered as affordable loans to Small and Medium Enterprises (SMEs) who have been adversely affected by the COVID-19 Pandemic.
“The proposed IFC investment is a senior loan of up to $50 million (Ksh5.3 billion) with a tenor of one-year renewable,” IFC said in its investment disclosures.
During the pandemic, Equity bank has taken a conservative approach which saw it call back its KSh9 billion dividend and even forfeit an expansion plan that was supposed to see the bank acquire some regional banks.
IFC which is the World Bank’s Private Equity wing will give SMEs a breathing chance as the Central Bank of Kenya (CBK) had projected that 75percent of Kenyan SMEs will have run out of reserves by the end of June.
“The investment will help expand the bank’s lending operations to the micro small and medium enterprises (MSMEs) segment in Kenya, especially to companies whose cash flows have been disrupted by the outbreak of the coronavirus pandemic.” IFC states.
The new loan will take Equity Bank’s debt to the global financier KSh22.7 billion from KSh17.4 billion. IFC did not reveal the cost of the loan but noted that it will be senior, a rank above other loans with regard to claims on the bank’s assets.
SMEs have been most affected by measures put in place to curb the novel coronavirus. Firms that are set to be eligible for the bank’s onward lending of the IFC loan are those with between 10 and 300 employees or annual sales of KSh10 million to KSh1.5 billion.
This makes Equity bank the first Kenyan bank to get a loan from IFC under its specific program to support lenders during the pandemic of COVID-19.
The loan size per borrower is expected that it will range from KSh1 million to KSh 200 million.