Commercial Bank of Africa plans to expand its market reach to small and medium level traders through a new fund.

The bank has partnered with African Guarantee Fund to launch a Sh200 million credit guarantee cover for distributors through its Small and Medium Enterprise financing schemes.

CBA Kenya chief executive Jeremy Ngunze said the fund will enable CBA to better price its loans for small traders by providing greater risk coverage.

"This will enable us service our existing SME customers mainly in the fast moving consumer goods sector. We also target to reach new ones," Ngunze said.

CBA has a loan book of Sh2 billion of which 10 per cent is to SMEs In November, CBA and Safaricom launched a mobile bank M-Shwari and by mid-February Sh378 million had been disbursed as loans while deposits stood Sh3 billion.

AGF an initiative of Denmark, African Development Bank and Spain was launched in June to support SMEs through credit guarantees.