The Nation Treasury will add Sh2 billion in fresh capital to guarantee commercial loans for small and medium enterprises (SMEs) in a bid to cushion them from the economic fallout arising from the coronavirus pandemic.
Treasury Cabinet Secretary Ukur Yatani said the government had decided to extend its capital in the scheme as it works towards the full Sh10 billion that was promised to promote loans to small businesses.
The government has already disbursed Sh3 billion this year and signed agreements with seven banks to offer the loans.
“To further promote access to affordable credit, the government has committed to progressively raise the capital. In this budget, I propose to allocate an additional Sh2 billion,” Mr Yatani said in his budget speech yesterday.
Policy makers reckon that banks will only provide loans to small businesses if they can get partial guarantees.
Under the scheme, the State will pay an undisclosed percentage of the losses in case an SME defaults on a commercial loan, a move that reduces the risk associated with lending to small businesses.
President Uhuru Kenyatta said the State is eyeing Sh100 billion for the scheme with more funds to be raised from international financiers.