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Absa bank gets Sh20 billion boost for MSMEs
What you need to know:
- The money will be loaned out to Absa’s customers in the MSME category, including those with existing business and startups in the country
Dar es Salaam. Absa Bank Tanzania Limited has signed a Sh20 billion Loan Portfolio Guarantee Agreement with the African Guarantee Fund (AGF) that will boost the lender’s financing for Micro, Small and Medium-sized Enterprises (MSME) in Tanzania.
The money will be loaned out to Absa’s customers in the MSME category, including those with existing businesses and startups.
Special priority will be given to those owned by women, youth and micro- SMEs, primarily in agriculture and the agricultural value chain.
The bank’s head of business banking Melvin Saprapasen said in a statement yesterday that the guarantee facility will also be used to support climate-focused businesses.
These include those involved in energy efficiency, renewable energy, natural resource management and climate insurance.
“Youth and women owned MSMEs face numerous challenges, including a lack of access to cost-effective financing, which is stifling the growth of MSMEs in the country. But through this agreement, we are looking to bridge this financing gap and accelerate the growth of existing MSMEs and start-ups,” he said.
Under the agreement, the AGF’s commitment is to assume up to 75 percent of every underlying transaction while the lender will bear the remaining risk.
The beneficiaries to be placed under AGF coverage must be registered or licensed MSMEs domiciled in Tanzania and must represent new or incremental business only geared towards investments or working capital credit facilities designed to encourage their growth.
The bank’s CEO Mr Obedi Laiser, said when fully utilised, the facility will catalyse roughly over Sh100 billion worth of loans to MSME in the next five years.
“This initiative is driven by our desire as Absa Bank Tanzania to better align our business with the government’s commitment to achieve economic diversification by ensuring MSMEs provide the next engine of growth and employment for our economy,” he said.
The AGF’s Group CEP Mr Jules Ngankam, said a strong and vibrant SME sector provides a strong foundation to enhance the standards of living and to reduce poverty.
“SMEs are a key contributing sector in Tanzania’s achievement of her development vision as a middle-income economy. While Tanzania’s SME sector contributes to a third of the overall GDP, access to finance remains a key constraint to the sector and this is what our partnership with Absa bank will address through the guarantee agreement. AGF has also commenced deliberations with Absa for the provision of Capacity Development to support the bank’s SME business through technical assistance,” he said.
