(AfDB) - The Board of Directors of the African Development Bank Group on Wednesday approved a $8 million-targeted financing to Kenya’s Credit Bank for lending exclusively to small and medium enterprises (SMEs) in construction, agriculture, renewable energy and manufacturing.

The loan, which has a five-year maturity with a two-year grace period, marks the first proposal under the Bank’s new initiative to prop-up SMEs in Africa. Credit Bank is privately-owned and dedicated to propelling SMEs’ growth through financing and capacity building initiatives.

“It is financially sound and, as an adequately capitalized tier-3 financial institution, has a strong track record of SMEs, providing working capital and trade finance facilities.  As such it is well-positioned to succeed in providing innovative longer term financial solutions to SMEs along several value chains including strategical financial solutions in Kenya,” Stefan Nalletanby, Bank Group director for financial sector development, told the Board.

Nalletanby said that Credit Bank has the supporting infrastructure and a strong presence in key economic regions within Kenya and is expected to support several small businesses in rural areas, thereby producing substantial development impact.

The over-arching objective of the project is to provide access to finance to SMEs, the “missing middle” in Kenya, thereby reducing their financing gap. The facility’s proceeds will support transactions aimed at improving their productive capacities thereby enhancing entrepreneurship, job creation, income generation, and sustainable growth, leading to a multiplier effect on the country’s economic growth, according to the Bank.

The facility also fits well with four of the Bank’s High 5 strategic priorities of “Improve the quality of life for the people of Africa,” “feed Africa;” “Light and power Africa,” and “Industrialize Africa”. It also aligns with the financial sector development policy and strategy and will contribute to the Bank’s Jobs for Youth Programme and the Affirmative Finance Action for Women in Africa programme.