Barclays Bank has set aside Sh300 million to offer alternative financing to SMEs in Kenya to empower them to do business with larger corporate organisations.
This is under its new enterprise and supply chain development programme (ESD).
Through the ESD programme, the bank will finance SMEs supplying goods and services to big corporates on the basis of a valid contract, enabling them to grow and make a bigger contribution to the economy.
This year, the bank has availed Sh150 million to support the programme with a provision to increase the amount should there be more demand.
Unlike other instances where borrowers are asked for brick and mortar collateral, the programme will access SMEs based on their business strength and profiles for funding.
The business must be in operation for at least two years to benefit from this initiative
Successful SMEs will access the funds through existing products including bank guarantees, letters of credit, short term loans, invoice discounting and overdrafts.
Beneficiaries will be identified through Barclays corporate customers. They are not required to be Barclays customers at the on-boarding stage.
The SMEs will enjoy customised non-financial support through workshops and training.
Corporate and investment banking director James Agin said the ESD programme is part of the bank’s shared growth agenda which is premised on the mantra that, as the community grows, the bank prospers.
The programme is anchored on three key growth pillars including financial inclusion, business development through training and access to markets.
“One of the unintended consequences of the interest rate capping is that banks have been forced to review their lending policies especially to micro and small enterprises due to the high risk associated with these segments.
Through this programme, we will not only provide funding for the SME’s within the corporate value chain, but also deploy training for entrepreneurs to support their growth.”
He said lending under ESD will leverage the bank’s existing relationship with its corporate customers and beneficiaries will therefore not be required to present their financials and other collateral to access funding.
This is good news to the SME sector in Kenya which is rated as high risk by most local lenders, hence harming its chance to acquire credit for growth.
In Kenya, credit risk remains elevated as financial institutions restructure their borrowings, this according to CBK monetary policy committee when it retained the Central Bank Rate at 10.0 per cent early this week.
Even so, the sector is crucial to Africa’s growth, contributing more than 45 per cent to employment and 33 per cent to GDP.
In high income countries, SMEs contribute nearly 64 per cent to the GDP and 62 per cent to employment.
In Kenya, SMEs contribute 98 per cent of GDP, 50 per cent of workforce and 25 per cent of enterprises.
Besides, it accounts for at least 65 per cent of new jobs created in the country every year.
The program which was started in South Africa will also be rolled out on pilot in Botswana, Ghana and Uganda before launching across the markets where Barclays Africa operates.