Merged Government fund to give women, youth loans at 6pc

Women go about their business at the Kibuye market in Kisumu County. [COLLINS ODUOR, STANDARD]

Youth, women, disabled persons and small enterprises will soon be able to get cheap business loans from the Government.

This is after Treasury came up with a new kitty, Biashara Kenya Fund, from which it will give loans directly to the special groups for as low as six per cent interest.

“The interest payable on a loan advanced to the persons referred to in regulation 13 shall be at the rate of six per cent per annum on a monthly reducing balance,” read in part the draft regulations that were released yesterday by National Treasury Cabinet Secretary Henry Rotich.

Commercial banks are currently lending at a minimum 13.5 per cent, way above the proposed new rate.

The fund will start with an initial capital of Sh2 billion to be allocated by Parliament.

Creation of the new fund means that the Youth Enterprise Development Fund and Women Enterprise Fund might be wound up.

Money borrowed from Biashara Fund will be used for business only, with applicants expected to prove that they have established businesses.

The Fund will also lend some of the money to intermediaries such as commercial banks, who will, in turn, lend to these special groups at a maximum rate of 10 per cent. 

Not more than 25 per cent of the fund’s cash will be lent to intermediaries.

“The interest payable on a loan on-lent by a financial intermediary to women, youth, persons with disability, enterprises and micro, small and medium enterprises shall be at a maximum rate of 10 per cent per annum on a monthly reducing balance,” indicated the draft regulations.

The Government will lend to banks at an annual interest rate of three per cent, though the fund’s advisory board can vary this to a minimum of one per cent. Banks will not lend more than Sh3 million to a single borrower from the funds.  

Initially, Treasury had planned to merge the three state banks - Consolidated Bank of Kenya, National Bank of Kenya and Development Bank, into one big financial entity known as Biashara Bank.

The move was fronted by the private sector, under the Kenya Private Sector Alliance (Kepsa), which urged the Government to fast-track plans to consolidate the institutions.

“Access to finance has been a key impediment to SMEs. Kepsa proposed the creation of a Biashara Bank as a means of facilitating and enhancing access to affordable credit for small and medium-sized enterprises,” said Kepsa Chief Executive Officer Carole Kariuki last year after a Presidential Roundtable.

“Kepsa was pleased to note that in November 2016, Treasury Cabinet Secretary Henry Rotich endorsed this idea with a proposal to establish Biashara Bank,” she added.

Other Government institutions that were to be merged so as to get rid of duplication included Kenya Industrial Estates, Development Bank of Kenya, Industrial Development Bank of Kenya, Uwezo Fund, Youth Enterprise Development Fund and Women Enterprise Development Fund.

A woman, youth or person with a disability shall be eligible to apply for a loan for business purposes if they are in a registered group where at least 70 per cent of the members are aged between 18 and 35 years.