The Chief executive of Credit Bank Ms. Betty Korir is betting big on the recently formed Credit Guarantee Scheme saying it will offer the much needed financial solution for struggling small businesses.

“While credit guarantee schemes take some time to deploy, we welcome the government’s move to enhance access to credit for SMEs. The purpose of this fund is to influence credit allocation to make it easier for SMEs who ordinarily may not qualify for the lending,” said Ms. Korir.

Micro, Small and Medium-sized Enterprises (MSMEs) continue to feel the brunt of the coronavirus pandemic.  

A massive surge in their mortality rate has been witnessed and as such, the unrelenting effects of the pandemic has eroded the gains made in advancing financial inclusion in recent years.

The hardest hit sectors, mainly manufacturing, trade, real estate, agriculture, education and transportation, even after the easing of restrictions by the Government, are still reeling from the impact of the pandemic.

A lack of liquidity has also limited their growth as most companies are trimming their workforce and closing altogether.

“This elevated risk has resulted in high default across most of the sectors that drive our economy. I would advise SMEs to ride on the current platform of the credit guarantee scheme and also talk to their bankers to understand how best to protect their margins,” added Ms. Korir.

She made those remarks recently during My Chat with a Bank CEO – Chat, an initiative by Kenya Bankers Association (KBA).

The Government through the Public Finance Management Regulations (2020) has set up a Sh3 billion stabilization facility to enable participating banks (Absa, Co-op, Credit Bank, DTB, KCB, NCBA and Stanbic) extend credit to MSMEs that meet the requirements.

Those requirements also include compliance with tax obligations and business permits and having a good credit standing. The finance will be utilized for working capital, acquisition of assets and recovery from Covid-19 impacts.

A Credit Guarantee is effectively an insurance that gives lenders the confidence to extend loans to high-risk borrowers at flexible terms and often faster than under ordinary circumstances.