Small and Medium Enterprises or simply (SMEs) are the backbone of developing countries. They aim at helping small enterprises or businesses grow and remain sustainable in the long term. Studies show that the companies are increasing to accommodate growing acceptance and demand.
An SME can be described as an enterprise or business of small and medium-size nature. It’s an independent firm and also a non-subsidiary. Typically, it will have fewer than 50 employees. Services offered by SME banks comprise trade finance, business-specific accounts, credit & debit cards, digital banking, mobile banking, asset finance, credit lines, and forex trading.
Kenya, being a developing country, heavily relies on this sector. According to a recent report from the CBK (Central Bank of Kenya), SMEs account for about 98% of all businesses in the country. The report further indicates that the sector employs approximately 30% of the workforce and accounts for 3% of the GDP (Gross Domestic Product).
The industry comprises both formal and informal businesses, but most falls under the latter category. Most enterprises are also unlicensed, which creates a good business opportunity for banks. This has seen the number of financial institutions, especially banks offering SME banking, increasing over the years. The following are some of the best SME banks in Kenya:
1. Equity Bank
Equity Bank was named the top SME bank in Kenya in 2019 by the Euro Money Awards. It also occupies a leading position in regards to customer and asset base. The financial institution has 9 million customers, and a good percentage falls under SME.
Equity bank seeks to support and empower customers and businesses economically and socially, as stated in its mission. It’s well known for providing customer-specific cash flow-based lending, flexible repayment terms, asset-based lending solutions, and extended moratorium periods.
Last year, 2021, the bank gave out Kshs 171 billion in loans. This allowed its customers to adjust to the harsh economic times and remain afloat despite the lockdowns and closures. The bank’s flexibility and understanding of its customer’s needs and market environment contribute to it being one of the best SME banks in Kenya.
Services offered include Commodity Finance, Working capital, asset financing, Term Loans, Guarantees, mortgages, Overdrafts, Equipment Financing Post Import Finance, Project finance Avalisation, and Letters of Credit. Loans advanced to SMEs accounted for 51% of the total loans.
In recognition of its support of SMEs, the IFC (International Finance Corporation) increased its stake in the bank’s shareholding. It provided Kes 18billion to support the bank lending to small and medium-sized enterprises.
2. Diamond Trust Bank (DTB)
Commonly known as “The SME Bank”, Diamond Trust Bank or simply DTB holds the second slot for the best SME banks in Kenya. It’s also among the oldest financial institutions in the region and was started in 1945.
The firm has an excellent regional presence and operates in Kenya, Uganda, Burundi, and Tanzania. According to its financial records, its total assets are worth about KES166.52 billion (US$1.924 billion). The institution offers many types of services. These include deposit-taking, trade finance, asset finance, foreign exchange, letters of credit (LC), and Bill Bonds.
In addition to offering banking services, DTB also educates its customers on sound business ethics. It regularly holds seminars and sessions from different locations. The institution also pays special emphasis to women who account for a big chunk of the partakers of its SME service. They have created an account that solely focuses on women-owned or run enterprises.
The financial entity played a leading role in helping small and medium-sized enterprises counter the Covid-19 pandemic. It allowed its customers to extend the payment duration for loans taken. Also, the bank offered more funding to the business to help them remain sustainable despite the low business volumes and economic lockdown.
DTB advanced approximately kes 1.6 billion to the companies within the period. Doing so gave the affected enterprises time to restructure or adjust to the new challenges.
3. ABSA Bank
Absa Bank is a leader when it comes to SME banking in Kenya. Over the years, it has been supporting small and medium-sized enterprises. Besides providing traditional banking services, it also created a tailor-made facility for the business.
The Wezesha Biashara Programme offers support and funding to SMEs. By focusing on financial and non-financial aspects, the program can provide the best solutions that are in line with the market needs. During the last financial year, ABSA, through the Wezesha Biashara Program, advanced Ksh35 billion to the enterprises. This saw most businesses thrive or remain sustainable even in the trying economic time.
Mrs Susan Situma, ABSA’s Head of SME Banking, offered Ksh.10 million in unsecured bid bonds and up to Ksh10 million in loans repayable in 5 years. Also, it provided as much as Ksh12 million in local purchase order (LPO) financing and unsecured invoice discounting amounting to Ksh50 million.
ABSA understands that the needs of SMEs are different from other types of enterprises. Therefore, it’s constantly innovating to offer the most convenient services. This entails offering customer-specific products, different credit rates, and identifying emerging business opportunities.
It regularly holds seminars and allows business owners to travel to other regions or countries to learn about new best practices. A good example was the African Continental Free Trade Area (AfCFTA) held on 1st January 2021. It provided new insights in line with sustaining business during the Covid-19 pandemic.
SMEs are, without a doubt, the backbone of the Kenyan economy. They greatly spur economic and social growth hence improving the well-being of the people in the country. And with more people venturing into this sector, it makes more sense for financial institutions such as banks to help the enterprises. This makes starting and running a business much more manageable.
It also ensures there is continuity for future growth prospects. The best SME banks in Kenya are conversant with the needs of the companies. This helps them provide the best solutions that spur growth and open new opportunities. A good case in point was the leading institutions’ role during the Covid-19 pandemic.