This archive report was first published on 29 June 2020.
On June 29, 2020, the International Financial Corporation (IFC) announced a $50 million loan to Equity Bank to support Small and Medium Enterprises (SMEs) hit by the COVID-19 pandemic.
Equity Bank, Kenya's second-largest bank by assets, has taken a conservative approach during the pandemic, including calling back its Ksh9 billion dividend and shelving an expansion plan that involved acquiring regional banks.
The IFC loan will provide Equity Bank with the liquidity to lend to SMEs, which are expected to run out of reserves by the end of June, according to the Central Bank of Kenya (CBK). The loan will have a tenor of one year, renewable.
‘The proposed IFC investment is a senior loan of up to $50 million (Sh5.3 billion) with a tenor of one-year renewable,’ IFC said in its investment disclosures.
‘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.’
Equity Bank had borrowed Ksh17.4 billion from the IFC as of December 2019, and the new loan will take that number to Ksh22.7 billion.
The loan will benefit SMEs with between 10 and 300 employees or annual sales of Sh10 million to Sh1.5 billion, with loan sizes ranging from Sh1 million to Sh200 million.
Equity Bank will become the first Kenyan bank to receive a loan from the IFC under its specific programme to support lenders during the pandemic.
