Equity Bank (EB), a microfinance institution (MFI) turned commercial bank in Kenya [1], has signed a KES 4 billion (USD 50.9 million) [2] loan agreement with the China Development Bank (CDB), a state-owned lending institution which targets national development in China [3]. In addition to targeting China’s domestic development, CDB also makes loans to rural communities abroad to spur development. This loan is part of a USD 5 billion fund set up by the Chinese bank for development of small and medium-sized enterprises (SMEs) in all of Africa [4].
James Mwangi, CEO of EB, says that the small and medium-sized enterprise (SME) sector has “faced the challenge of high costs of credit, bank charges and fees limiting their potential contribution to the country’s economy.” Additionally, he hopes that this move will “spur economic activities across the country” [4].
EB reduced its minimum lending rate for longer-term borrowing from 15 percent to 12 percent per year. Additionally, small and medium-sized enterprise (SME) borrowers will be able to receive loans at seven to nine percent per year for longer periods of three to seven years [4]. Loan sizes will range from KES 3 million (USD 38,100) to KES 30 million (USD 381,000) [2].
Because microfinance institutions (MFIs) sometimes lose their most successful customers to commercial banks as the customers grow, the lower lending rates are seen as an effort by EB to retain its small and medium-sized enterprise (SME) customers over time [4].
By Julia Korn, Research Associate
About Equity Bank (EB):
Equity Bank (EB) was founded in 1984. It has a gross loan portfolio of USD 535.8 million, 542,249 active borrowers, USD 627.1 million in deposits, 3 million depositors, total assets of USD 987.6 million and an average loan balance per borrower of USD 988. Its main funding sources are savings and shareholder capital. The products and services it offers are loans, voluntary savings and fund transfer services [5]. It has evolved from a “building society” to a microfinance institution to currently a commercial bank [1].
About China Development Bank (CDB):
The China Development Bank (CDB) has 36 branches throughout China. Its goals are to promote coordination in regional development and the restructuring of key industries, to facilitate the development of new rural communities, to promote international cooperation, and to focus on initiatives that enhance people’s livelihood through supporting sectors that have traditionally been faced with funding constraints. Through 2007, the bank lent a total of RMB 34.3 billion (USD 5 billion) since its founding in 1994 to support 917,000 small and medium-sized enterprises (SMEs), individual businesses and farmers. The bank continues to make loans to organizations across the globe [3].
Sources and Additional Resources:
[1] Equity Bank: “About Us:” http://www.equitybank.co.ke/about.php?subcat=7
[2] Full Universal Currency Converter: http://www.xe.com/
[3] China Development Bank: “Strategic Focus:” http://www.cdb.com.cn/english/Column.asp?ColumnId=86
[4] Capital Business: “Kenyan Bank Gets Chinese Credit” by Michael Karanja, May 17, 2010: http://www.capitalfm.co.ke/business/Kenyabusiness/Kenyan-bank-gets-Chine…
[5] MIX Market: Equity Bank. http://www.mixmarket.org/mfi/equity-bank
Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/
Similar Posts:
- MICROCAPITAL BRIEF: Oikocredit Loans MyCredit $2.6m for SME Financing in Kenya
- MICROCAPITAL BRIEF: Zanaco Borrows $50m from BII to Support MSMEs, Climate-change Mitigation in Zambia
- MICROCAPITAL BRIEF: FMO Lends $10m to Latin American Agriculture Development Corporation (LAAD) to Boost Green Investment
- MICROCAPITAL BRIEF: Araratbank of Armenia, FMO Ink $10m Risk-sharing Facility to Boost MSMEs
- MICROCAPITAL BRIEF: AIA Commits $200m to LeapFrog Investments Seeking Positive Social, Environmental Impact
