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A third of SMEs fail to secure funds, new report shows

By George Orido | October 6th 2019
President Uhuru Kenyatta is introduced to Small and Medium Enterprises exhibitors by the Kenya National Chamber of Commerce and Industry President Richard Ngatia at the 2019 Nairobi ASK show last week. Looking on is Nairobi Governor Mike Mbuvi Sonko. [George Orido, Standard]

A third of small and medium-sized enterprises (SMEs) that needed funding failed to secure loans, a new report shows.

The SME Competitiveness Survey said 33 per cent of small businesses indicated that their applications were either rejected, opted not to apply due to high interest rates, collateral requirements and complex application procedures.

“Commercial banks in Kenya already derive a substantial portion of their portfolio and revenues from SMEs and SME-focused financial products, so new approaches are needed to broaden and deepen financial inclusion among smaller Kenyan companies,” noted the report.

The survey was done in partnership between the Kenya National Chamber of Commerce and Industry (KNCCI), the Ministry of Industry, Trade and Cooperatives and the International Trade Centre, which is a joint agency of the World Trade Organisation and the United Nations.

The report found that 45 per cent of respondents had applied for a loan. Of these, 84 per cent secured a loan and 5 per cent had an application in progress.

It said 48 respondents, representing 17 per cent of those who did not seek a loan, cited unfavourable interest rates as the reason for their decision. A total of 118 respondents, or 13 per cent of the surveyed firms, identified high interest rates as their biggest financial challenge.

“We are establishing an SME development fund to support the growth of small businesses through credit facilities,” said KNCC President Richard Ngatia.

He said the lobby has secured funding in excess of Sh250 million from various partners including Financial Sector Deepening (FSD Kenya), Swedish International Development Cooperation Agency (SIDA), European Union (EU) and Alliance for a Green Revolution in Africa (AGRA). The chamber will next month recognise outstanding SMEs from all counties.

It has also partnered with Technical and Vocational Education and Training institutions and Federation of Kenyan Employers (FKE) to address issues of job skills and readiness among the youth.

“Our partnership with FKE and Tangaza University will scale up the social entrepreneurship programs that aim to support the Youth, Women and People with disabilities,” said Mr Ngatia, who was recently elected chairperson of the Great Lakes Region Private Sector Forum.

Diplomatic relations

KNCC has secured support from Business Advocacy Fund to undertake training on governance for the board of directors, the national Governing Council and County Executive Officers to enhance financial management at the institution level.

For inclusivity and to bring in more businesses on board, the chamber has re-established a desk at Huduma Centre to extend chamber services to members of the public since July this year. It is part of the larger campaign to enlist a further 200,000 new members this year.

The chamber hopes to promote international trade by maintaining diplomatic and bilateral trade relations. “To strengthen economic diplomacy, we have provided opportunities and an all-inclusive approach for chamber leadership and secretariat to take part in all foreign delegations and missions,” said Ngatia. The lobby has hosted 10 foreign envoys including trade missions to Brazil, Colombia and Japan.

After meeting with the Russian Federation Ambassador Dmitry Maksimychev last week, Mr Ngatia will lead 80 Kenyan businesses to Sochi for African-Russian forum October 23-24, where President Uhuru Kenyatta will also attend.

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