I&M, Dutch lender agree on US$15 million for risky SME loans

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  • Dutch Development Bank, FMO, will cover the lender against loan defaults of up to Sh1.7 billion (US$15 million)
  • I&M Bank will broaden the availability of financial services to micro, small, and medium-sized enterprises (MSMEs)
  • The NASIRA programme is a novel financial programme that aims to target disadvantaged entrepreneur sectors in nations bordering Europe and Sub-Saharan Africa

I&M Bank Kenya has entered into a deal with the Dutch Development Bank, FMO, which will cover the lender against loan defaults of up to Sh1.7 billion (US$15 million) that have been extended to small and medium firms.

The Kenyan institution, which is a solely-owned subsidiary of I&M Group PLC, has been a loyal customer of FMO for many years. Since 2010, I&M Bank Kenya has been one of FMO’s customers.

The European Union’s European Fund for Sustainable Development and the Financial Markets Organization of the Netherlands’ (FMO) Management of the Financial Inclusion Fund (MASSIF) provide funding and support for the NASIRA programme.

iMara strategy

As part of its ongoing, I&M Bank intends to broaden its engagement with micro, small, and medium-sized enterprises (MSMEs); therefore, the risk-sharing facility will be used for the MSME portfolio.

More than one-third of Kenya’s gross domestic product is generated by micro, small, and medium-sized enterprises (MSMEs), most of which are held by women and young people. However, many business owners continue to have difficulty gaining access to various forms of financial assistance.

Traditional business customers have been the primary focus of the bank’s attention as of late. Following the plan laid out by the bank, I&M Bank will broaden the availability of financial services to micro, small, and medium-sized enterprises (MSMEs) all over the nation while simultaneously offering digital solutions, such as partnerships with fintech companies, to facilitate a seamless transition.

NASIRA Programme Agenda

The NASIRA guarantee would encourage financial inclusion, providing assistance to micro, small, and medium-sized enterprises (MSMEs) that have been impacted by COVID-19. The NASIRA programme is a novel financial programme that aims to target disadvantaged entrepreneur sectors in nations bordering Europe and Sub-Saharan Africa. Specifically, NASIRA focuses on underbanked populations such as young people, women, migrant workers, and workers affected by COVID-19.

Financial institutions have frequently overlooked these populations due to perceived and actual dangers (such as lack of credit history and collateral). With the help of the risk-sharing facility, NASIRA lowers the risk that local financial institutions are exposed to and removes the barrier by offering to share future credit losses. This makes it possible for NASIRA to provide much-needed financing to microenterprises and small and medium-sized businesses.

I&m;Dutch lender have agreed to cover Sh1.7 billion in SME loans. [photo/thecommonwealth.org]
The NASIRA facility will also support Capacity Development and Technical Assistance by providing non-financial services such as digitising businesses and the promotion of MSME, lending practises, financial literacy, and more.

This support will be made possible by the European Union (European Fund for Sustainable Development) and MASSIF (the financial inclusion fund FMO manages for the Dutch government). Both of these organisations will provide funding for the facility.

FMO’s Huib-Jan de Ruijter, Chief Investment Officer said:

We are glad to yet again extend our backing to our long-term client I&M Bank Kenya via a NASIRA portfolio guarantee. The previous few years have demonstrated that NASIRA guarantees and the accompanying technical assistance may significantly reduce inequality by supporting the financing of promising female, young, and refugee entrepreneurs in the European Sub-Saharan Africa neighbourhood.

This most recent assurance is entirely in line with our overall plan, and it helps to Sustainable Development Goals 8 and 10, which are respectively titled “Decent Work” and “Economic Growth,” and “Reduced Inequalities.”

With the inauguration of the EFSD+ this year, we are looking forward to extending our mission through NASIRA, which will greatly increase our contribution to equitable economic growth, the creation of jobs, and environmentally responsible development throughout the larger range of geographical areas and industry sectors.

Kihara Maina, the Chief Executive Officer of I&M Bank in Kenya, made the following observation in response to the recent development:

I&M Bank bases its commercial model on enabling prosperity for all of its stakeholders.” We strongly believe that the assurance from FMO will help our clients who are  SMEs, speed the growth of their businesses and support their expansion initiatives while also offering support to those clients who have been adversely affected by COVID-19.

EU Ambassador to Kenya Henriette Geiger expressed her joy at the increased financial access to underrepresented enterprises in Kenya through the implementation of the NASIRA guarantee agreement signed between the FMO and European Commission in 2019 under the European Fund for Sustainable Development (EFSD).

Covid-19 has affected many entrepreneurs and MSMEs, and the NASIRA guarantee assists in de-risking financing to neglected entrepreneur sectors such as young, female, migrant, and COVID-19-affected businesses.

Read: Equity Bank to finance 5 million SMEs creating 50m jobs in AfCFTA

Maingi Gichuku is passionate about helping African businesses grow by offering technology solutions. With a BSC in Zoology and biochemistry, Gichuku yearns for an Africa that can find solutions to its challenges. My drive is to see an economically dynamic Africa and embrace its populations by creating opportunities cutting across the social and economic strata.

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