China Development Bank (CDB) on Monday extended a 50 million U. S. dollars loan to Kenya's largest Equity Bank.

The loan will be used to boost small and medium-sized enterprises (SMEs) in Kenya.

Key beneficiaries of this funding are those involved in agro- processing for value addition for exports. The credit line will be spent on factory establishment and imports of machinery. "It is significant that Kenya and Equity bank becomes the first beneficiary of this SME fund for Africa. It reflects the growing relationship between Kenya and China", CDB Chief Executive Officer and Governor Jiang Chaoliang said during the signing ceremony in Nairobi.

The facility is for a six-year period and will be advanced to SMEs at interest rates of between 3 and 7 percent, making it the cheapest source of funding for sector in the country.

The signing of the facility is a culmination of years of study on the Equity Bank's model and how it can be replicated on rural China. On its part, Equity has been seeking funding and transfer of low cost housing technology and long term funding for SMEs.

The facility was signed in Nairobi today after three years of negotiation. "The signing signifies south to south cooperation and collaboration to address our common challenges," Jiang said.

The facility will allow Equity Bank advance long term development loans to the SMEs sector at affordable interest rates in a bid to spur the sector which plays a crucial role in the social economic development of the country. "We are proud to be the first beneficiary of this support by CDB and will allow us grant our SME customers long term facilities for development at very affordable interest rates", Equity Bank chief executive Dr James Mwangi said.

Equity now becomes the first beneficiary of the Chinese 5 billion dollar fund for the development of small and medium enterprises in Africa.

The funding will address, lack of access to affordable credit cited as one of the key challenge facing the development of the SME sector in Kenya, thus stifling its growth and profitability.