Absa, fintech in agreement to increase loans to women-led businesses

Elizabeth Wasunna-Ochwa, is the Director of Business Banking-Absa Bank Kenya.

Absa Bank Kenya has entered into an agreement with a digital financing platform to increase access to credit for women-led micro and small businesses under the lender’s Sh10 billion pus.

The agreement with Melanin Kapital, an MSME-focused funding marketplace, targets 600 businesses with an annual turnover of at least Sh1 million.

Melanin will train women-owned or led micro and small businesses in sustainable business models, capacity building, mentor matchmaking and networking activities that will prepare them to access credit and set them on the path to growth.

The businesses will then receive funding from Absa at an interest rate of 13 to 14 percent which will be partially covered by the African Guarantee Fund (AGF) – the African Development Bank-owned facility to divert lending to small traders – in the event of default.

“We leave no business behind in terms of empowerment and knowledge. The truth is that some may not be eligible for funding, which is why we started conversations around training,” said Elizabeth Wasunna, director of commercial banking at Absa.

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“We know that when we mentor women, there’s a ripple effect because one thing women are good at is sharing experiences. If we continue on this journey, we’re making an impact.”

The Tier-1 lender in February 2020 committed a Sh10 billion fund for women-led businesses that can borrow as much as Sh3 million to be repaid in three years.

The partnership is aimed at bridging the growing funding gap for women-led businesses which AGF estimates at $42 billion in Africa.

“About 40 percent of women in Kenya have bank accounts, and with fintech and digital lending platforms that we have in Kenya, I would say that [funding] the gap would be smaller in Kenya compared to other regions in Africa, says Nishdeep Sethi, AGF’s executive vice president for structured finance.

Banks continue to assign MSMEs a higher risk profile, typically pricing them out of the credit market despite industry data showing that default rates among small businesses have been lower over the years than for corporates.

The findings of a 2016 survey by the Kenya National Bureau of Statistics (KNBS) concluded that in 2015, about 71 percent of the 7.4 million MSMEs received fewer loans than they had sought from the banks, with about 86 percent forced to rely on family and friends.

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The whole process is digitized, which ensures that every MSME understands what documents they need and what level of income they need to achieve because it is usually not clear to them what kind of documents the loan officer is going to ask for, says Melanie Keita, CEO. manager of Melanin Kapital, said.

“We look at small and medium-sized businesses that generate at least NOK 1 million in annual revenue and look at a wider spectrum when it comes to industry.”

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