Top banks mobilize Ksh.100 billion for SME lending


Top banks mobilize Ksh.100 billion for SME lending

Top Kenyan banks have turned to international institution to firm up their armory to support small and medium enterprises as well as bolster their capital basis.

According to analysis of listed banks half year disclosures by the Cytonn Financial Services Research team, the top banks have raised nearly Ksh.100 billion for the exercise.

The bulk of the cash mobilization happened at the start of the year with mobilization slowing down significantly in the second quarter.

Equity, KCB, Cooperative and I&M banks have raised a combined Ksh.95.7 billion for onward lending.
Equity Group has mobilized the bulk of funds at Ksh.62.9 billion to include Ksh.2.6 billion in grants from European Investment Bank (EIB).

KCB has on its part mobilized Ksh.16.4 billion for the SME lending plans.

Meanwhile, Cooperative and I&M banks have raised Ksh.11 billion and Ksh.5.4 billion respectively, a sum which includes tier II capital.

Litmus test

While the funds mobilization may translate to increased SME lending on paper’s, banks still hold the burden of proof as their support for SMEs remains under sharp focus.

Credit growth to the private sector remains malnourished despite the end of interest rate caps but has been significantly drowned by the recent COVID-19 pandemic.

For instance, private sector credit growth has not touched double digits since June of 2016 and has only peaked at 9.6 per cent in April this year.

According to the latest available data from the Central Bank of Kenya (CBK), private sector credit stood at 7.7 per cent at the end of June.

While credit to the sector has thinned, the government has been eating SMEs’ lunch with the growth in net credit to government standing at 22.4 per cent with the rate of credit growth by source at 20.2 per cent for commercial banks and non-bank financial institutions (NBFIs).

For the little credit trickling to the private sector; consumer durables, transport & communication, finance and insurance have taken the largest chunk of loans disbursed.

On the opposite end, credit to mining and quarrying activities has slacked to a negative 13 per cent.

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