Small businesses to benefit from Sh3b cheap State loans

Small and medium business entities will access cheap guaranteed loans from banks, starting today, as the State moves in to enhance their survival.

This is after Treasury Cabinet Secretary Ukur Yatani (pictured) officially unveiled a credit guarantee scheme that will enable small enterprises affected by the pandemic access cheap loans from seven local banks.

The lenders are KCB, Co-operative Bank, Absa Kenya, NCBA, Diamond Trust Bank, Stanbic Bank and Credit Bank.

Mr Yatani yesterday said measures to kick-start the process that will see micro, small and medium enterprises (MSMEs) borrow the cash has been finalised, with businesses now set to start applying for the loans.

“With reduced turnover and disruptions in the market and supply chains, many MSMEs were, and still are, unlikely to attract affordable and quality credit under the traditional arrangements. Interventions are necessary to cushion the impact of Covid-19 on MSMEs,” said Yatani yesterday.

The Sh3 billion credit guarantee scheme is part of Sh58 billion that the government will pump into the economy - breathing a new life in key sectors that have been devastated by the pandemic.

The National Assembly has since appropriated the money for roll-out in the current financial year ending June 2021.

The government expects to increase the allocations to the scheme to Sh7 billion in the next financial year. 

The borrower must, however, be registered by the county government and hold a valid business permit or trade licence - a requirement that is captured in the Public Finance Management (Amendment) Bill, 2020.

The new regulations on the credit guarantee scheme are aimed at de-risking banks’ lending to small businesses without collateral.

Adequate liquidity

Mr Yatani said the Kenya Mortgage Refinance Company will also be instrumental in maintaining adequate liquidity among primary housing mortgage providers, adding that banks and Saccos will also play a critical role in the credit guarantee scheme.

KCB Group Chief Executive Joshua Oigara said the scheme will be rolled out to the other 33 banks to ensure many MSMEs are supported.

“With this scheme, we will see close to 30 or 40 per cent of our lending going to this important segment of our economy, knowing the industry lends Sh2.5 trillion,” said Oigara who is also Kenya Bankers Association chair.

“The ambition is to reach the entire banking industry.”