Absa Bank big investment in fintech to support women-led businesses

The agreement with Melanin Kapital, an MSME-focused financing marketplace, targets 600 businesses with an annual turnover of at least Sh1 million.

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Absa Bank Kenya has inked a deal with a digital financing platform to increase access to credit for women-led micro-and small-sized enterprises under the lender’s Sh10 billion kitty.

The agreement with Melanin Kapital, an MSME-focused financing marketplace, targets 600 businesses with an annual turnover of at least Sh1 million.

Melanin will train women-owned or led micro and small firms on sustainable business models, capacity building, mentor matchmaking and networking activities which will prepare them to access credit and put them on a path to growth.

The businesses will then get funding from Absa at an interest of 13 to 14 per cent which will be partially covered by the African Guarantee Fund (AGF) — the African Development Bank-owned facility for derisking lending to small traders — in event of default.

“We are not leaving any business behind in terms of empowerment and knowledge. The truth is some may not be eligible for financing and that’s the reason we started conversations around training,” Elizabeth Wasunna, director of business banking at Absa, said.

“We do know as we mentor women, it is a ripple effect because one thing that women are good at is sharing experiences. If we continue on this journey, we are making an impact.”

The tier-one lender in February 2020 committed an Sh10 billion fund for women-led businesses which can borrow as much as Sh3 million to be repaid in three years.

The partnership is geared at bridging the widening funding gap for women-led businesses which AGF estimates at $42 billion in Africa.

“About 40 per cent of women in Kenya have bank accounts and with the fintech and digital lending platforms that we have in Kenya, I would say the [funding] gap would be less in Kenya relative to other regions in Africa,” said Nishdeep Sethi, AGF’s group director of structured finance.

Banks continue to assign a higher risk profile to the MSMEs which usually prices them out of the credit market despite industry data showing the rate of default among small businesses has over the years been lower than that for the corporates.

Findings of a 2016 survey by the Kenya National Bureau of Statistics (KNBS) concluded that about 71 per cent of the 7.4 million MSMEs in 2015 got fewer loans than they had applied from the banks, with about 86 per cent forced to rely on family and friends.

The whole process is digitized, ensuring that each MSME understands which documents they need and which level of revenue they need to achieve because for them it is not usually clear what kind of documents the loan officer is going to ask for,” Melanie Keita, chief executive of Melanin Kapital, said.

“We are looking at SMEs that generate at least Sh1 million in annual revenue and looking at a wider spectrum when it comes to the industry.”

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