SMEs get Sh15bn World Bank recovery cash


The National Treasury building in Nairobi in this picture taken on March 15, 2023. PHOTO | DENNIS ONSONGO | NMG

Kenyan small businesses that were ravaged by the Covid-19 pandemic will benefit from a Sh14.47 billion ($100 million) financing from the World Bank, a National Treasury document shows.

The Treasury noted that the objective of the Supporting Access to Finance and Enterprise Recovery (SAFER) project is to increase access to financial services, enhance capabilities, and support the post-Covid-19 recovery of micro, small, and medium enterprises (MSMEs).

“The project seeks to address market failures in the provision of finance to MSMEs, which have been exacerbated by the negative impact of Covid-19,” said the Treasury in a report that was published in March this year.

The support will complement the Financial Inclusion Fund, popularly known as the Hustler Fund, that President William Ruto launched soon after he was sworn in as part of his bottom-up agenda.

The size of loans to individual microenterprises will range between Sh7,000 and Sh150,000 while small enterprises will get between Sh150,001 and Sh250,000.

The repayment is expected to go between 18 months and three years for the micro-enterprises and small ones in that order.

The Treasury explained that a grace period of six months may apply for both loans.

About Sh8 billion will support liquidity, especially those enterprises that are women-led and are in the informal sector, to respond to the adverse effects of the pandemic.

Another $30 million (Sh4.42 billion) will be used on de-risking with the National Treasury setting up a Credit Guarantee Scheme to enable the provision of partial credit guarantees to financial institutions that on-lend MSMEs.

The remaining $15 million (Sh2.2 billion) will go to technical assistance to build the resilience capacity of the MSME finance ecosystem beyond the five-year project.

At the height of the Covid-19 pandemic, a lot of MSMEs closed shop due to the stringent safety and health measures that the government implemented to curb the spread of the viral disease.

As a result, close to 1.8 million jobs were lost in an economic crisis that paralysed the hospitality, transport, education, and entertainment sectors, official data shows.

Enhance liquidity

In response, retired President Uhuru Kenyatta unveiled an eight-point economic stimulus programme with one of its elements being enhancing liquidity to MSMEs through the provision of affordable credit.

The SAFER project will be managed by the National Treasury with the instructions that saccos and microfinance banks on-lend eligible MSMEs.

About $5.39 million (Sh795 million) have been disbursed by the International Development Association, an arm of the World Bank Group that lends to poor countries.

SAFER is a five-year IDA credit whose financing agreement was signed on February 8, 2022, while its effectiveness date was May 9, 2022.

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