SMEs receive Sh2bn funding under State-backed credit guarantee scheme


The National Treasury building in Nairobi on Sunday, May 24, 2020. PHOTO | DENNIS ONSONGO | NMG

More than Sh2 billion has been issued to micro, small and medium-sized enterprises (MSMEs) under the state-backed credit guarantee scheme.

National Treasury says by December 2021, a total of 1,291 small businesses had taken loans amounting to Sh2.1 billion since the scheme was launched a year ago. The credit guarantee scheme encourages banks to disburse credit to borrowers they would otherwise turn away, confident that they will be compensated in case of defaults.

“There was a steady growth in beneficiaries through the year, with 338 facilities issued in December 2021 as compared to two facilities a year earlier,” Treasury Cabinet Secretary Ukur Yatani said in a statement.

The fund was established to enhance access to quality and affordable credit for the growth and operations of MSMEs which would otherwise find it difficult to access loans from commercial banks.

A select group of commercial banks issue the loans and can be compensated for up to a quarter of losses from default using the cash provided by Treasury, which now stands at Sh3 billion.

This means that the banks including Absa Bank Kenya #ticker:ABSA , Diamond Trust Bank Kenya, KCB #ticker:KCB and Co-op Bank #ticker:COOP can provide loans worth at least Sh12 billion or four times the amount provided by the government in the scheme.

The loan limit is set at Sh5 million per borrower with a repayment period of 36 months.

Small enterprises accounted for 52 percent of the beneficiaries, followed by medium enterprises (25 per cent) and marginalised groups including women, youth and persons living with disabilities (23 per cent).

Of the Sh3 billion provided by Treasury, only Sh546.2 million was absorbed, with the balance of Sh2.45 billion still available to guarantee up to Sh9.8 billion in credit to qualifying MSMEs through the seven banks.

“The figure amount will go higher as repaid guarantee funds are also factored,” said Mr Yatani.

The credit guarantee scheme backed by the government adds to other facilities run by multilateral lenders and development finance institution that seeks to boost SMEs’ access to credit for growth and working capital.

Last year, a Central Bank of Kenya study showed that banks turned away 28 per cent of small businesses while microfinance institutions declined 96 percent of their loan applications.

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