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Regulator drops plan to list State loan backed SMEs

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Capital Markets Authority CEO Wycliffe Shamiah. FILE PHOTO | NMG

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Summary

  • The Capital Markets Authority (CMA) has dropped its push to have small businesses that access the government’s SME loan guarantee scheme compelled to list on the Nairobi bourse.
  • In September last year the government said it would provide Sh10 billion to guarantee commercial loans for SMEs— being issued through local banks— to cushion them from the economic fallout from the coronavirus pandemic.
  • CMA had proposed to the National Treasury that SME’s seeking loans under the scheme should be compelled to list as part of conditions for access of the funds.

The Capital Markets Authority (CMA) has dropped its push to have small businesses that access the government’s SME loan guarantee scheme compelled to list on the Nairobi bourse, and will instead put in place a long-term fund that will underwrite listing.

In September last year the government said it would provide Sh10 billion to guarantee commercial loans for SMEs— being issued through local banks— to cushion them from the economic fallout from the coronavirus pandemic.

CMA had proposed to the National Treasury that SME’s seeking loans under the scheme should be compelled to list as part of conditions for access of the funds.

CMA chief executive Wycliffe Shamiah said instead of competing with banks, the regulator now wants a broader fund that will help small business reduce the cost of listing even as it offers loan guarantees.

“A major impediment in listing for small businesses is the cost of raising funds. You get that when say you are raising Sh10 million, and you have to pay Sh3 million in costs, it becomes hard. You have to find a way to cushion those raising money,” Mr Shamiah said.

“We are thinking of developing a fund that could even guarantee SMEs to get loans at a fair price. But this needs a policy to be put in place. It needs government support, so it may take some time.”

CMA had sought to play a part in the SME guarantee scheme as a measure of promoting corporate governance and transparency in the use of proceeds for business growth, subject to stakeholder engagement and participation.

The government opted instead to rely on its own pre-conditions to access the money that stipulates that targeted SMEs must have an annual turnover of not more than Sh100 million and a workforce of between 51 and 250 workers.