SMEs spoilt for choice as investors pump in Sh16 billion

Borrowers are set to benefit as foreign investors pump billions of shillings into credit facilities targeting small and medium enterprises and low-income earners.

The new wave has targeted financial technology (fintech) companies and banks, relying on data analytics to create credit profiles for borrowers with little or no credit history or security.

This is a paradigm shift in the financial sector that is likely to erode interest incomes for traditional banks.

Kenya Commercial Bank (KCB) yesterday became the latest beneficiary of the new wave, announcing Sh10 billion in new financing from the African Development Bank (AfDB) targeted at SME lending.

The bank said the funds would go to liquidity and value addition support for businesses in various sectors with a special focus on the youth. “The credit will boost KCB’s ability to reach and serve deserving corporate businesses and SME businesses in Kenya,” said AfDB Director-General for East African Regional Development Gabriel Negatu in a statement announcing the financing.

In the past few years, mobile lending has grown to become a key revenue stream for banks eager to regain ground lost to fintech service providers with the advent of mobile money.

Mobile transactions now account for more than half of KCB customer transactions, with only 23 per cent of account holders accessing services at the branches.

The bank further doubled mobile loan disbursement from Sh14 billion to Sh30 billion between 2016 and 2017, indicating the growing appetite for mobile borrowing in the country. A recent study by Consumer Insight showed that mobile lending had become the first source of credit for Kenyans after friends and families, surpassing bank loans.

Foreign investors are taking note of the growing market and have pumped over Sh16 billion into financial providers targeting mobile borrowers this quarter alone. US-based fintech Tala on Wednesday announced closing a Sh6.5 billion round of financing.