Under the partnership, NIC bank will take up ATIs insurance cover product to protect their portfolio of trade finance borrowers against the risk of failure and non-payment risks that have prevented most African banks from lending to SMEs.
“What we realised after dealing with most of our customers especially the banks, the challenge is, SMEs could not borrow easily because of the fact that most of them do not have collaterals and they also don’t have enough financial data,” George Otieno CEO, African Trade Insurance Agency told CNBC Africa.
As the access to credit remains the biggest challenge for SMEs in the region, the credit insurance cover will help extend credit facilities such as short term loans, invoice discounting, bank guarantees and letters of credit without the requirement of the solid securities as is the current practice.
“What we did is that we looked at what we could do to make it easy for SMEs to borrow and we designed this product. It took us quite some time, we’ve been working on it for almost a year with the NIC,” he explained.
According to him, other banks in the country have begun looking at it and he believes that it will roll out in other countries where they do business in Africa.
“What is going to be able to happen now is that NIC is going to be able to turnaround and within 48 hours be able to offer a loan facility because they don’t have to go through the process of charging any property, doing a search, and so on and so forth,” he added.
The ATI products also stand to impact the Kenyan financial industry as it provides protection against credit default risks thus opening up a window of opportunity of both the SMEs and the banks to benefit.