Editorials

CMA listing push misplaced

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Capital Markets Authority regulatory and policy director Luke Ombara. PHOTO | SALATON NJAU | NMG

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Summary

  • The main reason the credit guarantee scheme is being introduced is to make quick funding available to SMEs that have found it difficult to access bank loans since the Covid-19 pandemic struck.
  • The last thing that is needed is another bureaucracy and lost time in the form of requiring the listing of the would-be beneficiaries of the loans.
  • The CMA says going public will ensure the companies have better corporate governance and disclosures.

The Capital Markets Authority’s proposal that small businesses must first be listed on the Nairobi Securities Exchange before getting bank loans guaranteed by the government is misplaced.

The main reason the credit guarantee scheme is being introduced is to make quick funding available to SMEs that have found it difficult to access bank loans since the Covid-19 pandemic struck.

The last thing that is needed is another bureaucracy and lost time in the form of requiring the listing of the would-be beneficiaries of the loans.

The CMA says going public will ensure the companies have better corporate governance and disclosures. This is a needless distraction. Most companies that borrow from banks are not listed and their chances of getting a loan is mostly a function of their cash flows or collateral they can provide.

Listing is no panacea. We have seen some publicly-traded firms default on loans besides carrying out mega fraud. The CMA should step out of the way and let banks and the government do what they can to help SMEs ride out the pandemic.