(Ecofin Agency) – After granting a $125 million syndicated credit facility to NMB Bank Tanzania, the Dutch institution FMO is setting up a guarantee that will cover the Tanzanian bank’s loans to underserved SMEs and perceived as too risky by banks.
The Dutch development finance institution, FMO, announced on Friday 24 February the setting up of a risk-sharing mechanism in the amount of $11 million with the NMB Bank Tanzania. This mechanism will allow the Tanzanian commercial bank to increase its financing for local micro, small and medium-sized enterprises (MSMEs).
This $11 million guarantee with NMB Bank is part of the Nasira program, set up by the FMO in August 2020 to increase financing for underserved SMEs and microenterprises limited in financing due to high risks. The Dutch institution intervenes indirectly via local financial institutions to support these SMEs. It thus undertakes to share with the banks any credit losses linked to the granting of loans to underserved SMEs.
This Nasira risk-sharing mechanism is the first of its kind deployed by FMO in Tanzania. However, NMB Bank is a long-time client of FMO. It recently obtained from the Dutch institution and from Proparco a syndicated loan of $125 million to finance micro-enterprises and SMEs.
The FMO guarantee will cover loans from the Tanzanian bank to small and medium-sized enterprises in the agricultural value chain, as well as women and youth-owned enterprises, which face difficulties in accessing formal bank financing. In addition, the FMO will provide the NMB with the technical assistance necessary to reach these segments.
Chamberlain Moko
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