Boost for SMEs as State guarantees Sh10b credit

SCHEME: Lenders are predicting a rise in demand for quick loans on improving business conditions being backed by Cabinet’s approval of Sh10 billion Credit Guarantee Scheme targeting micro, small and medium-sized enterprises (MSMEs).

In an effort to advance access to loans for struggling small business operators reeling from the effects of Covid-19, the credit guarantee kitty to be made operational by mid next month, will have an initial seed capital of Sh10 billion to be capitalised in two tranches of Sh5 billion in the financial year 2020/21 and Financial Year 2021/22.

Banking system

Micro lender Jijenge Credit expects a surge in loan requests from MSMEs which make up most of its customers with gradual re-opening of the economy and increased liquidity of the banking system.

Jijenge’s CEO Peter Macharia in an interview with  Business Hub said loans disbursements had shown steady rise. 

“The number of calls and inquiries have really gone up since July and August is now opening up.

We are very optimistic as the curve now begins to flatten, it is a reprieve for businesses such as ours,” Macharia, said adding that the firm had lost more than 50 per cent of its business volumes compared to the same period last year (March to July).

Cabinet also approved the Micro and Small Enterprises Policy, whose aim is to provide an integrated business environment for the growth and development of stable and vibrant MSEs in Kenya.

“The Policy recognises the vital role played by MSMEs in the economy, particularly with regard to wealth and employment creation,” reads in part the Executive Order signed by the President.

Macharia’s comments resonate with those by the Market Perceptions Survey undertaken in July that sampled local banks who expect a pick-up in demand for credit beyond August due to the opening up of the economy.

Faced with lockdowns across major counties and restrictions on movement in certain towns many businesses had been staring at a decline in collections and increased demand for working capital from borrowers, most of whom continue to struggle to qualify for loans.