African Development Bank Approves $30M Trade & SME Finance Facility for Family Bank Limited

The Board of Directors of the African Development Bank Group has approved a $30 million Trade & SME Finance Facility for Family bank Limited (FBL) in Kenya. The facility is expected to boost intra-Africa trade, promote regional integration and contribute to the reduction of the trade & SME finance gap in the East African nation.

The facility will provide a Trade Finance Line of Credit to support FBL’s short-term trade finance activities,  a Transaction Guarantee, which will provide a risk-covered strategic platform to enable confirmation of trade transactions originating from FBL, as well as a targeted Line of Credit through the Bank’s Africa SME Program.

The Facility is expected to boost intra-Africa trade, promote regional integration, and contribute to the reduction of the trade & SME finance gap in Kenya, by mobilizing significant financial resources for SMEs and local enterprises. This will enhance and deepen value chains, and diversify productive capacity, ultimately stimulating growth in Kenya.

The Bank will provide up to $10 million to support FBL’s short-term trade finance activities of SMEs and local corporates, an up to $10 million Transaction Guarantee facility to support the confirmation of trade finance transactions of FBL and up to $10 million targeted Line of Credit to support medium-term financing for SMEs in the health, renewable energy, and agriculture sectors. The facilities will also support women-owned businesses.

FBL will use the short-term trade facility to complement the Line of Credit and provide shorter-term trade loans along value chains of SMEs and local corporate businesses. In addition, the TG Facility will allow the Bank to provide up to a 100% guarantee to Confirming Banks for the non-payment risk arising from the confirmation of letters of credit and similar trade finance instruments issued by FBL. All this is on the back of the Africa Continental Free Trade Area (AfCFTA) agenda of reshaping markets and economies across the region by helping to boost output in the services, trade, manufacturing, and natural resources sectors.

Speaking soon after the Board approval, the Bank’s Acting Director for Financial Sector Development, Ahmed Rashad Attout stated: “We are excited about finalizing this facility with FBL as a partner and which will aid FBL in scaling up its trade & SME finance offerings in Kenya to help meet the ever-increasing trade & SME finance gap. It will allow FBL to play a significant role in providing funding as is necessary for the post-COVID-19 economic recovery of Kenya.”  

The African Development Bank estimates the trade finance gap for the African continent at $82 billion. Compared to multinational corporates and large local corporates, SMEs and other domestic firms have greater difficulty in accessing trade finance and medium-term financing.  

The Bank’s Director General for East Africa, Nnenna Nwabufo said: “The advent of COVID-19 coupled with stringent regulatory/capital requirements and KYC compliance enforcement, has seen many global banks reduce their correspondent banking relationships in Africa, while some are exiting the market altogether. There is therefore an urgent need for financing to reenergize Africa’s trade, which requires more participation of institutions like the African Development Bank”.  

The facility is aligned with the African Development Bank’s High 5 priority goals to: light up and power Africa; feed Africa; industrialize Africa; integrate Africa; and improve the quality of life for the people of Africa.

Family Bank became a fully-fledged commercial bank in May 2007. The Bank is regulated by the Central Bank of Kenya (CBK). From only one branch in 1985, the Bank has grown over time and currently enjoys a network of 92 branches countrywide. It was the first Bank in Kenya to introduce paperless banking through smart card technology that enables customers to transact without having to fill in deposit or withdrawal slips.

The bank has over 1.7 million customers with a growing balance sheet and deposit base. The bank is leveraging the successful adoption of the universal banking model. The model aims at gradually positioning the Bank as a one-stop-shop providing retail & consumer products, SME, agribusiness, corporate banking, Trade Finance and insurance products.