AfDB approves Sh7.8b facility for Equity to boost exporters

A ship with containers at the Port of Mombasa. [Robert Menza, Standard]

Exporters and cross-border traders have received a major boost with the approval of a Sh7.8 billion ($60 million) financial guarantee facility from the African Development Bank (AfDB) to Equity Bank Kenya.

The move is designed to directly ease the flow of goods and payments across borders. The facility, dubbed Transaction Guarantee, will act as a powerful financial incentive for local businesses. 

It allows Equity Bank to issue and support letters of credit, essential payment guarantees in international trade with the full, risk-free backing of the AfDB’s AAA credit rating. 

This means international suppliers and confirming banks can trust transactions with Kenyan importers and exporters, reducing a major hurdle to trade.

“The proposed Transaction Guarantee will help address critical market demand for trade finance in Kenya by supporting trade in various vital economic sectors such as agriculture, energy, manufacturing, and construction,” the AfDB said in its project approval document seen by The Standard. 

The direct beneficiaries are expected to be small and medium-sized enterprises (SMEs) and local corporates, enabling them to secure imports and fulfil export orders with greater financial security, the AfDB said. 

For traders, this translates to more reliable and accessible credit lines, it noted. 

A Kenyan horticulture exporter, for instance, can more easily get a bank guarantee assuring a foreign buyer that their shipment will be delivered, while a manufacturer importing machinery can assure the overseas seller of payment.

The deal is expected to significantly advance Equity Bank’s visible strategy of championing Kenyan traders. 

The bank has been organising and sponsoring international trade missions to connect local businesses with new markets across Africa and beyond. 

This new facility is expected to provide the concrete financial tool to turn those connections into actual transactions, said AfDB. 

The guarantee is a key component of Equity Group’s broader Africa Resilience and Recovery Plan (ARRP), framed by Equity Group Chief Executive James Mwangi as a strategic framework to fuel sustainable economic recovery by directing finance into productive, job-creating sectors. 

“The project is expected to promote intra-African trade and regional integration,” the AfDB noted, highlighting the facility’s broader continental objective.

The Equity Group operates a banking network across six African nations besides Kenya. They include Uganda, South Sudan, Rwanda, Tanzania, and the Democratic Republic of Congo, with a presence in Ethiopia.

This regional footprint is critical for Kenyan traders seeking to expand within East and Central Africa, as the bank can facilitate seamless cross-border financial services.

The AfDB noted the facility carries a moderate environmental and social risk profile. It includes safeguards, such as a prohibition on financing coal projects and a cap on fossil fuel exposure.

While the facility does not have a dedicated portion for women-led businesses, the AfDB expects women entrepreneurs to benefit from the overall increase in accessible trade finance.

The AfDB said the approval tackles a persistent problem, which is the global trade finance gap the shortfall between the funding needed for trade and what is available which the AfDB estimates at about $100 billion (Sh13 trillion). 

By mitigating risk, the AfDB said its Sh7.8 billion guarantee directly unlocks the credit Kenyan traders need to grow, promising a more integrated and resilient trade ecosystem for the region. Equity Bank says it aims to significantly expand its presence in the trade finance sector to over Sh130 billion in four years. 

“Equity Bank Kenya Ltd intends to grow its Non-funded Trade Finance Portfolio to $1 billion (Sh130 billion) by 2029 and become the number [one] Trade Finance Bank,” according to the AfDB project summary document outlining the bank’s strategic objectives.