Equity Group has announced that it launched a Ksh. 678 billion stimulus package to accelerate economic recovery in Eastern & Central Africa.
The stimulus package will be private sector focused and will be aimed at accelerating economic recovery and resilience in the Eastern and Central Africa region as it recovers from the devastating health, social, humanitarian, and economic impacts of the COVID-19 pandemic.
Equity’s Eastern and Central Africa Recovery and Resilience plan is envisaged to provide financing of up-to 2% of the combined GDP of the six economies, in which the Group operates, to the private sector. This will be in the form of blended financing of short-term overdrafts, medium term loans and credit facilities which require long-term project and development financing.
While launching the Recovery and Resilience Plan Dr. James Mwangi, Equity Group Managing Director and CEO said, “A total of Ksh. 678 billion (USD 6 billion) will be available to 5 million MSMEs and 25 million individual borrowers for the next 5 years. The plan conceives that the 5 million businesses largely comprising MSMEs will create 50 million jobs, 25 million jobs directly and an equal number of jobs indirectly as the ecosystems of business become more cohesive, connected, and ultimately synergize and grow. The recovery plan will have special focus on youth and women, supporting them to be the primary drivers of creating and expanding opportunities in the real economy. Under the Young Africa Works Initiative in partnership and collaboration with the Mastercard Foundation, the plan will build capacity in young people through financial literacy, entrepreneurship training and digital literacy. To ensure that no one will be left behind, lending to young people will be complemented with credit guarantee facilities to mitigate default through our credit risk pricing model that has opened inclusive credit access to all. Risk based credit pricing has enabled us to adopt a transparent, all-inclusive interest rate, at the current average central bank rate that ranges from 13% to 18.5% for the lowest risk and the highest risk categories respectively.”
The Regional Development Plan through recovery and resilience initiatives will focus on five thematic areas:
- Primary sectors of Food and Agriculture, and extractive sectors
- Manufacturing and Logistics
- Trade and Investments
- Micro small and medium enterprises
- Social impact and Environmental investments
Under the primary sectors, the focus will be on unlocking productivity gains and value addition ecosystems to achieve food security for the region while increasing value creation in the primary sectors. The plan targets agricultural transformation by enhancing value chain coordination, capacity building of smallholder farmers-anchoring them better to formal value chains, financing mechanisation and credible inputs.
The recovery and resilience plan seeks to leverage on productive capacities and comparative advantages to transform the region into a manufacturing hub that converts agricultural raw material into finished products for export and national use. The plan covers value addition for all primary products including retaining value in mineral processing to export semi-finished and finished products. The plan targets financing of in-country manufacturing and regional supply chains to replace broken global supply chains following COVID-19 disruptions.
Focus on trade and investments will enable expansion of markets for the primary sectors of Food and Agriculture and the manufactured products, along with the realisation of investments to support growth of the two sectors. The East African Community, following the inclusion of DRC (Democratic Republic of the Congo), will provide an expanded regional market with similar characteristics and requirements. The African Continental Free Trade Area Agreement (AfCFTA) presents, with it opportunities that the Plan seeks to fully utilize by signing an implementation and collaboration partnership with the AfCFTA Secretariat to position Equity Group as an implementation partner. The plan also seeks to fully utilise existing Trade and Investment Agreements such as the European Union Trade Agreement, the United States of America’s AGOA (African Growth and Opportunity Act) framework, and the capacities of the Commonwealth community.
To enhance the success rate among MSMEs and young people, the plan involves credit risk sharing mechanisms and capacity building through financial literacy and entrepreneurship training.
“The Group has pilot tested lending to young people under the Young Africa Works in partnership with Mastercard Foundation with a resounding success rate of 436,000 MSMEs trained and funded to the tune of Kshs 136 billion, and 1.2 million jobs created by the enterprises as they expand and grow on access of financing,” said Dr. Mwangi. “The objective of the plan is to formalise the informal sector of MSMEs by linking them with formal manufacturing and primary food and agriculture sectors and by populating their value chains and ecosystems to achieve growth and resilience while accelerating recovery of the MSME sector,” added Dr. Mwangi.