Funding blues set back waste disposal sector

Lack of financing and failure to invest in better sewerage systems are holding back the take off of waste management business, slowing down a growth area with potential to create jobs and ensure cleaner environment.

Investors engaged in this trade told Business Daily that banks have been difficult sources of capital because of the way they value the waste processing business model.

Banks for example decline to finance garbage collection equipment that they believe cannot be resold easily in case of business failure.

“Banks take garbage collection as a non-traditional business. It does not make sense how they evaluate some segments of this business,” said Moses Nderitu, the managing director of Excloosive, a waste management company.

Mr Kimanthi Mutua, the managing director of K-Rep Bank, said the waste management business is classified as “unique” business in the banking industry and therefore banks are usually advised to be “more careful” when deciding to fiancé the business.

The risk assessment process for such businesses is intense and therefore less of them qualify for business loans.

“You look at the equipment used in such a business and if you were to repossess, whom would you sell it to? Then the loan becomes non-performing and you are forced to discount all of it,” he said.

For example, banks shy away from financing the trailers used by Excloosive to pull temporary toilets because it is not easy to sell them in case the business collapses.

“My interaction with banks has been disappointing,” said Mr Nderitu.

Mr Mutua, however, said the problem is beyond a single bank because even the Central Bank has lending standards for unique businesses.

“What we as the banking industry need to do is to rethink how we can finance such business because they have potential for mass creation of employment. This opportunity is being lost.”

Banks only finance waste management projects in Kenya if they are in partnership with development groups like the World Bank and United Nations agencies, which can absorb the loss in case of business failure.

New evidence based on a survey from research firm Frost and Sullivan said waste management business will be an important growth area in the next five years, an opportunity for private sector because of inability of local authorities to handle all of waste management process.

Garbage is a major resource for processing into fertiliser, plastic products and decomposes to produce highly flammable gas that can be tapped and used to generate electricity or used as cooking gas.

A thriving waste management industry would also mean that garbage collection companies will offer free services to the households and recover their cost when they sell the waste; the raw material; to the processors.