Kenyan businesses, particularly small and medium-sized enterprises, are set to gain significant traction in international markets following the approval of a KES 7.8 billion ($60 million) trade finance guarantee facility for Equity Bank by the African Development Bank (AfDB). This strategic partnership aims to de-risk international trade and ease the flow of goods across borders for local firms.

The core of this deal is to make it easier and cheaper for Kenyan importers and exporters to do business. The facility allows Equity Bank to provide a 100 percent guarantee to international banks that confirm Letters of Credit, a standard tool in trade. This essentially means the AfDB is underwriting the risk, making Kenyan businesses more attractive and reliable trading partners on the global stage.

Unlocking Growth for SMEs

For years, Kenyan SMEs have faced significant hurdles in accessing affordable trade finance. High costs, perceived risks, and a lack of sufficient collateral often lock them out of lucrative import and export opportunities. This new facility directly confronts that challenge.

"This facility comes at a pivotal time for Kenyan businesses, especially SMEs, that continue to face significant barriers in accessing affordable trade finance," noted Moses Nyabanda, Managing Director of Equity Bank (Kenya) Limited. He emphasized that the AfDB's support strengthens the bank's ability to help local enterprises trade with confidence and manage risk.

The guarantee is expected to have a ripple effect on the economy by:

• Lowering the cost of issuing letters of credit for businesses.
• Increasing the availability of trade finance for vital sectors like agriculture and manufacturing.
• Boosting export revenues and contributing to job creation.

A Boost for Intra-African Trade

This initiative is also a significant step towards realizing the goals of the African Continental Free Trade Area (AfCFTA). By empowering Kenyan businesses to trade more freely, the facility is poised to enhance intra-African commerce and strengthen regional supply chains.

Lamin Drammeh, AfDB's Trade Finance Division Manager, remarked that supporting trade is a key priority for the development bank. "Trade finance is essential for Africa's economic development, facilitating both domestic and international trade, boosting economic growth, and promoting regional integration," he stated.

The partnership between AfDB and Equity Bank, a lender with a significant footprint in SME financing, is seen as a strategic move to ensure the funds reach the intended businesses effectively. The ultimate goal is to build a more resilient and integrated African market, with Kenyan businesses playing a crucial role.