Small businesses now fail to take up Sh400m grant
Posted Wednesday, June 27 2012 at 22:45
A Sh400 million grant meant to attract private equity firms to invest in small businesses has not taken off because of confusion over how the money is to be disbursed.
The Industrialisation Ministry was to give up to Sh10 million to small businesses in which venture funds had invested. The money from the World Bank was to be repaid interest-free within three years.
“The uptake of the fund has been very poor,” said Industrialisation Assistant Minister Nderitu Muriithi.
Only 30 businesses had used the facility against a target of 150.
The funds were meant to cushion small investors who cannot afford collateral normally required by banks and whose revenues are not sufficient to meet the high interest rates charged on loans.
Business owners said there is not enough information about the availability of the money.
“People don’t want to waste their time over something they don’t understand clearly,” said Mr Athony Monda of TKM Maestro, a mobile infrastructure company.
Players in the private equity sector say the conditions under which the funds were to be given to businesses have never been clearly spelt out.
“It was not well explained whether the funds will be given out as loans or grants,” said Mr George Odo, the managing director of Africinvest, a private equity fund.
Most of the small businesses are also finding it had to get funding from private equity firms due to poor management such as lack of clear business records.
Some of the private equity funds in the country include Acumen fund, TBL Mirror fund, Fanisi capital among others.
Eline Blaauboer, a partner with TBL Mirror, said that part of the reasons some of the businesses were not taking up the funds was because private equity funds demanded shareholding in the companies as security.
TBL has so far given loans to eight businesses under the scheme.
The Ministry of Industrialisation has in the recent past been criticised for returning funds meant for lending to small businesses back to the World Bank.
The World Bank gave the government $5 million as a grant to small businesses to encourage them to take advantage of the private equity investor funds.