SEP 11 – Absa Bank Kenya has extended support to struggling businesses, renegotiating payment lines to help businesses manage rising finance costs.
The lender’s Managing Director and CEO, Abdi Mohamed, said the bank restructured Ksh1.3 billion of loans in the first half of 2024 to help Kenyan businesses escape the pitfalls they are currently facing while also protecting the economy.
In the first half of the year, Kenya experienced a tough macro-economic environment characterized by high inflation and interest rates amidst geopolitical pressures and currency challenges.
Despite this tough environment, Absa Bank pulled in an impressive 29 percent jump in net profits of Sh10.7 billion on increased lending, especially micro-loans, via the Timiza platform, proving a crucial lifeline for the retail market.
The lender has achieved 8.4 percent growth in non-funded income, with its gross lending going up by Sh64 billion, thanks to diversified traditional revenue sources and strong performance from new revenue streams, including asset management and brokerage services.
“We are observing a preference for short-term financing, which indicates a focus on working capital. Many customers want to continue growing their businesses in a challenging business environment. They opt for short-term financing options such as an overdraft, with a repayment period of one to three months, to prevent their businesses from shutting down. Once their costs decrease, these same customers can consider longer-term financing options,” Mr Mohamed said.
Absa Bank Kenya has announced that it is also prioritizing green lending. It aims to expand into a new area of growth by supporting sustainable businesses and focusing on inclusive finance, particularly for women-led businesses.
Mr. Yusuf Omar, the Chief Finance Director of Absa Kenya, stated that the bank plans to double its sustainable finance in the short term to assist businesses in transitioning, making energy savings, and investing in new growth pockets.
“We have recorded growth in a dynamic economy. We have also been able to provide support beyond financials and are committed to becoming a sustainable financial services company that addresses the evolving needs of a modern-day consumer through innovation and strong partnerships,” said Mohamed.
The bank is also keen on riding the market recovery. The Central Bank of Kenya has reduced the policy lending rate to 12.75 percent, offering a cushion to borrowers who are already struggling with costly loans.
“The country has experienced a decrease in the Central Bank Rate for the first time in two years. It seems we are moving in the right direction, and the government has indicated that the rates will continue decreasing. If this materializes, it will result in a reduction in the cost of loans. Currently, traders are opting for short-term facilities, and long-term borrowing has decreased. Additionally, there has been an increase in secured lending at this time,” stated Omar.
