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Equity Group gets $165m credit facility to support MSMEs across Africa

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Published: 13 May 2022

The International Finance Corporation together with other development finance institutions and impact investors are providing a $165m credit facility to Nairobi-based Equity Group to support lending to MSMEs

Mohamed Gouled, IFC, and James Mwangi, Equity Group during the signing of the partnership support lending to MSMEs under the ‘Africa Recovery and Resilience Plan’ | Photo by Equity Group

The International Finance Corporation (IFC) and other development finance institutions (DFIs) and impact investors are providing a $165m (€194m) credit facility to Nairobi-based Equity Group (Equity), to support small entrepreneurs including climate-smart businesses and those owned by women and young people.

IFC is taking on $50m of the credit facility, British International Investment (BII – formerly known as CDC) is providing $50m and the remaining $65m is coming from Dutch Development Bank (FMO) and Swiss investors Symbiotics and ResponsAbIility.

The credit facility is intended to help Equity’s regional banking subsidiaries provide finance to at least 5 million micro, small and medium-sized enterprises (MSMEs), including climate-smart businesses, and 25 million households, creating 50 million direct and indirect jobs, as part as Equity Group’s ‘Africa Recovery and Resilience Plan’.

Equity has banking subsidiaries in Kenya, the Democratic Republic of Congo, Rwanda, Uganda, Tanzania, and South Sudan. It also has subsidiaries in investment banking, insurance, telecom, fintech and social impact investment.

The organisation agreed another $50m credit facility with IFC in November 2021 to provide additional local currency loans to MSMEs in the DRC. In January 2021, Equity Group signed a $100m loan facility with BII, FMO and Germany’s DEG to provide funds to help MSMEs survive and recover from Covid pandemic. 

“As our second investment in Equity Bank, this investment will further increase working capital to more local businesses and help to fund climate eligible projects in Kenya,” Seema Dhanani, BII’s head of office Kenya & coverage director, East Africa, said. 

IFC invests as Equity Group shuns coal      

Additionally, IFC and the IFC Financial Institutions Growth Fund have acquired a 6.71% stake in Equity Group. As part of the deal, the group committed not to make coal sector investments and to allocate $80m of equity towards climate-related interventions across all its subsidiaries over the next 5 years. 

It’s the first African investment by the IFC in line with its new policy of making more green equity investments in financial institutions. 

Mohamed Gouled, vice president, risk and finance at IFC, said at the signing ceremony that  supporting small businesses, digital financial services and climate-friendly projects was central to IFC’s strategy in Africa to help create jobs, respond to climate change, and leverage the opportunities provided by the digital economy.  

“IFC’s deepening partnership with Equity Group reflects that strategy and will support economic growth in Africa as the continent recovers from the effects of the Covid-19 pandemic,” he said. 

The IFC investment was also dependent on Equity Group committing not to lend to coal-related projects. That is a significant move in the context of Kenya, where the government had been considering using coal to meet growing energy demand.

Plans to build a 1-gigawatt coal fired power station at Lamu fell apart after potential investors, including international financial institutions and Chinese companies said they would no longer invest in coal projects in the region.  

Now off limits for investment by Equity are coal-fired power plants, coal mines, transportation assets used exclusively for coal, and infrastructure assets exclusively used to support coal mining and transportation.

Equity Group has also committed not to invest in any utility company that generates more than 20% of energy or revenues from coal, or has annual coal production of more than 10 million tons, or an installed coal-fired capacity of 5 gigawatts or more. 

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