Small credit window squeezes SMEs

Such opportunities, the financial institutions say, would help resolve some of the problems associated with the export of merchandise from Kenya.

But local entrepreneurs say some banks with limited regional reach are making it difficult for traders to secure credit to facilitate export businesses.

“Some financial institutions which do not have regional presence are very cautious when it comes to lending to the small and medium enterprises venturing into cross-border trading” says Mr Richard Muteti, the chief executive of the Kenya National Federation of Jua Kali Associations. “Some banks look down upon SMEs as those businesses that are not able to transact sophisticated businesses.”

But business organisations such as the Kenya Private Sector Alliance say some SMEs are shying away from seeking credit because the funds are high due to the risk associated with the export business.

The high risk associated with the export business has also resulted to high cost of insurance, say entrepreneurs. This, they say, has contributed to the difficulties encountered by local businesses in attempts to break into export markets.

SMEs say they cannot access credit because financial institutions perceive export business as risky especially when goods are freighted by sea.

Pirate attacks in the sea have raised the cost of insurance on transit goods and some exporters now believe it is not the best channel for transporting goods.

According to the Kenya Shippers Council (KSC), businesses in the east African region paid out Sh2 billion every month to cover the cost of piracy over the last 18 months

Among the new charges that shipping lines have introduced to ensure pirates do not drive them out of business are those for container handling that have risen by between 34 and 150 per cent compared to rates before October 2009 and bulk cargo freight rates, which have gone up between five and 150 per cent.

Voyage time has increased from an average of 12 days to 30 days.

The problems of exporters are compounded by the fact that local insurance firms are not interested in covering export goods because of increasing theft and pilferage.

Several cases of theft of goods on transit have been recorded on highways such as the Nairobi-Nakuru stretch where robbers have attacked truckers.