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Kenya’s Family Bank (FBL) has received $30 million  from African Development Bank (AFDB) Group to boost trade and lending to Small and Medium Entreprise (SMEs).

The facility is expected to boost intra-Africa , promote regional integration and contribute to the reduction of the trade and SME finance gap in the East African nation. This facility is targeted at enhancing and deepening value chains, and diversifying productive capacity, ultimately stimulating growth in Kenya.

The bank will provide up to $10 million to support Family Bank’s short-term trade finance activities of SMEs and local corporates. The lender will also provide up to $10 million transaction guarantee facility and up to $10 million  to support medium-term financing for SMEs in the health, renewable energy, and agriculture sectors. The facilities will also support women-owned businesses.

Family Bank will use the short-term trade facility to bolster its line of credit and provide shorter term trade loans along value chains of SMEs and local corporate businesses.

In addition, the transaction guarantee facility will allow the bank to provide up to 100% guarantee to confirming banks for the non-payment risk arising from the confirmation of letters of credit and similar trade finance instruments issued by FBL.

The deal fits into Africa Continental Free Trade Area (AfCFTA) agenda of reshaping markets and economies across the region by helping to boost output in the services, trade, manufacturing, and natural resources sectors.

“We are excited about finalizing this facility with FBL as a partner and which will aid FBL in scaling-up its trade & SME finance offerings in Kenya to help meet the ever-increasing trade & SME finance gap. It will allow FBL to play a significant role in providing funding as is necessary for the post COVID-19 economic recovery of Kenya,” said Ahmed Rashad Attout, AFDB’s Acting Director for Financial Sector Development.

AFDB estimates the trade finance gap for the African continent at $82 billion.

Compared to multinational corporates and large local corporates, SMEs and other domestic firms have greater difficulty in accessing trade finance and medium-term financing.

“The advent of COVID-19 coupled with stringent regulatory/capital requirements and KYC compliance enforcement, has seen many global banks reduce their correspondent banking relationships in Africa, while some are exiting the market altogether. There is therefore an urgent need for financing to reenergize Africa’s trade, which requires more participation of institutions like the African Development Bank,” said the bank’s Director General for East Africa, Nnenna Nwabufo.

The facility, Mr Nwabufo said is aligned with the African Development Bank’s five priority goals “to light up and power Africa, feed Africa, industrialize Africa,  integrate Africa, and improve the quality of life for the people of Africa”.