Kenyaâ€™s political climate has failed to facilitate the rebound of SMEs
SEE ALSO :Public rants ought not to stall economyFinancial services One of the surest economic barometers in a non- mineral economy such as Kenya is the financial services sector. All the other sectors in the body-construct of the economy swivel around financial services. Over the past few months, several things pertinent to our financial services sector reveal the troubled waters of Kenya’s economy and attractiveness as an investment destination. All Tier 3 and microfinance banks are making losses. And while this has worsened in the last 12 months, this was a problem precipitated in Uhuru Kenyatta’s first term. When Kiambu Town MP Jude Jomo brought amendments to the Banking Act that saw interest rates capped, Uhuru Kenyatta signed it into law despite warnings from Treasury and the Central Bank of Kenya. President Mwai Kibaki must be a very disappointed man. One of Kibaki’s legacies was to open up credit to Kenyans and making Kenya a real free market economy.
SEE ALSO :Banking boosts Kenya’s economyIt was in Kibaki’s tenure that banks opened their doors to the poor. The ripple effect of this was an upsurge of micro, small and medium enterprises (MSMEs). The MSMEs in Kenya like in other developing economies have become a major boon to alleviating unemployment. However weak By prolonging interests rate caps, the Kenyan government is denying these MSMEs their lifeline which is credit as availed by commercial banks. From a purely political perspective, it was understandable why Uhuru Kenyatta agreed to sign the interest cap bill into law. However weak a premise it is, he was just winding up his first term and was looking for a second term, and the way the bill was marketed to the public was that it was a Robin Hood silver bullet to cut banks to size. I say it was a weak premise because while the bill promised cheaper credit, it meant that banks would raise their risk profiling of borrowers, locking out MSMEs from the creditworthiness band. Kenyatta chose the easier route by signing the bill into law instead of explaining why such a law was dangerous to the economy. Three years later, the chickens have come home to roost, with a blue-collar economy once thriving and an alternative source of employment, plummeting to levels that have seen more auctioneers’ adverts than job advertisements in newspapers. [email protected]
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