Nairobi — KCB Bank Kenya and the Swedish International Development Cooperation Agency (SIDA) have signed an agreement to insure loans issued to small businesses to the tune of Sh1 billion.

The seven-year guarantee facility will enable the bank to increase lending to small and medium-sized enterprises that are deemed risky, thus facing credit access challenges.

KCB Bank Acting Director of Retail Banking Michael Kung'u noted that the new instrument will provide much-needed momentum for SMEs to tap into the bank's expanded portfolio of SME financing options to enable them to contribute fully to the growth of Kenya's economy.

"We are excited about this new instrument as it offers us the flexibility to work with SMEs and the refugee population in their ambitions to support their entrepreneurial journey," Kung'u said.

"The SME guarantee will therefore go a long way in diversifying the SMEs' financing resources and reducing collateral requirements, thereby enabling them to play a leading role in achieving economic and social development," he added.

Risk-sharing facilities are a key tool to support knowledge gaps by lenders, broadening their SME lending while mitigating risk and allowing them to build capabilities and track records in serving niche market segments like SMEs and refugees.

"Sweden's Development Cooperation through the Swedish International Development Cooperation Agency (Sida) aims to create opportunities for better living conditions for people living in poverty and under oppression," Swedish Ambassador to Kenya Caroline Vicini said.

"This initiative will enable Sweden's engagement to go beyond the Official Development Assistance (ODA) and focus more on innovative financing approaches to mobilize domestic resources and external private capital to reach the most vulnerable communities in Kenya."