Absa Bank’s improved lending scheme for SMEs.

Absa Bank Kenya, through the Wezesha Biashara Program has given approximately Ksh 35 Billion to small and micro-enterprises to help them grow. 

According to Mrs Susan Situma, Absa’s Head of SME Banking, the holistic offering, which includes both financial and non-financial components such as capacity building and mentorship, has generated a lot of demand from the sector.

Absa has been introducing new business and corporate banking solutions as well as renovating the existing SME packages. 

“We have had a good run with SMEs since we started our Wezesha Biashara focus over four years ago. We have seen good gains on how we have repositioned, and our staff across our branch network are now speaking the SMEs language,” Mrs Situma says.

The Wezesha Biashara campaign was created in 2016 with the goal of assisting SMEs with their cash flow problems.

“We have seen good growth despite the effects of the pandemic on SMEs. Some sectors were affected, others did better. We saw a lot of the businesses coming for non-financial support through the period, to understand how to establish themselves as stable businesses.’’

SMEs account for 98 percent of all firms registered in the country. They account for roughly 33% of GDP. The importance of providing funding options in this area cannot be overstated.

The program was redesigned by Absa Bank Kenya to offer unsecured loans of up to Ksh 10 Million with a five-year repayment period and local purchase order (LPO) financing of up to Ksh 12 Million. Unsecured invoice discounting of up to Ksh 50 Million is also available, as well as unsecured bid bonds of up to Ksh 10 Million. In addition, it provides insurance services.

Since its inception, the program has trained over 16,000 SMEs and 6,500 women.

“Looking at the effect of the pandemic, some of the businesses recorded lost revenues, while others shut down. The insurance protects the entrepreneur,” she adds. 

The Credit guarantee scheme

The government launched a Ksh 10 Billion Credit Guarantee Scheme last year to protect the SME sector from the impact of the Covid-19 pandemic. Absa Bank Kenya is one of the seven lenders on the scheme. Under the government scheme arrangement, the government covers up to 25% of the loan portfolio. 

To be eligible for the fund, a business must have a turnover of less than Ksh 100 million and have been affected by Covid-19 as evidenced by sales. The maximum amount a consumer can borrow is Ksh 5 million, and businesses are not permitted to add to existing credit lines, but must instead take out new loans under the programme to help them restore their businesses. They should also be registered and tax-compliant.

The facility will be operational for the next three years, therefore loans will be provided until the end of this year. This means that participants have one year to distribute cash for working capital or asset finance, but must repay the money within three years.

Some regulations, such as business registration, have slowed adoption, as the majority of SMEs in Kenya have never been registered.

Absa Bank Kenya is offering loans with a credit guarantee facility at a discounted rate of up to 12% and a one-time processing charge of 2%. Normal bank loans have a 14 percent interest rate and a three percent processing fee.

“We are confident of a good uptake on this guarantee scheme. We ask SMEs to visit any of our branches or call us to access these discounted facilities,” says Mrs Situma.