Kenya’s largest lender by market capitalisation, Equity Bank, has secured a $60 million African Development Bank (AfDB) guarantee that will allow it to expand letters of credit for Kenyan importers and exporters while shifting repayment risk off its balance sheet.
As such, the support package, which has been approved by the AfDB board, reinforces Equity’s capacity to intermediate trade flows for small and medium-sized businesses.
“The facility will enable Equity Bank to provide guarantees of up to 100 percent to confirming banks for non-payment risks arising from the confirmation of Letters of Credit and similar trade finance instruments that it issues in Kenya,” the AfDB said in a disclosure on Saturday.
What the facility means for Kenyan businesses
The guarantee is designed to derisk Equity Bank’s trade finance operations, particularly for SMEs involved in import and export activities facilitated by letters of credit.
Letters of credit are a core instrument in international trade, allowing sellers to receive payment once shipping and documentation conditions are met, while transferring credit risk from buyers to banks.
With the AfDB providing full guarantee on non-payment risk, Equity Bank can lower the cost of issuing this financing instrument and expand trade finance volumes without adding pressure to its balance sheet.
For Kenyan businesses, the transaction is expected to improve access to trade finance and reduce costs tied to perceived credit risk. SMEs, in particular, often face higher charges or outright exclusion from letters of credit due to weak balance sheets or limited transaction history.
“This facility comes at a pivotal time for Kenyan businesses, especially SMEs, that continue to face significant barriers in accessing affordable trade finance,” said Moses Nyabanda, managing director of Equity Bank (Kenya) Limited.
“The African Development Bank’s support strengthens our capacity to unlock growth opportunities for local enterprises by enabling them to trade with confidence, manage risk and sustain their operations,” he added.
By transferring buyer default risk to the AfDB, Equity Bank can broaden participation in international trade and support firms seeking to scale beyond domestic markets.
Boost to regional and intra-Africa trade
The AfDB said the transaction supports its wider objective of promoting intra-African trade and advancing the African Continental Free Trade Area (AfCFTA).
“Supporting trade in Africa is a key priority at the African Development Bank,” said Lamin Drammeh, manager of the AfDB’s Trade Finance Division. “Trade finance is essential for Africa’s economic development, facilitating both domestic and international trade, boosting growth and promoting regional integration.”
The facility also reflects the AfDB’s growing focus on private sector financing. Last week, the lender extended $150 million to KCB Bank to support women-led SMEs and green projects, underscoring its expanding role in strengthening trade and enterprise across the region.
