Enterprise

Start-ups cash formula in era of rate capping

Alternative financiers are getting increased applications from micro businesses. FILE PHOTO | NMG
Alternative financiers are getting increased applications from micro businesses. FILE PHOTO | NMG 

Cash-starved small enterprises (MSMEs) are increasingly warming up to alternative financiers as banks continue to lock them out of credit market due to perceived high-risk profile.

High cost of credit and lack of collateral to adequately cover for loans from commercial lenders, studies have shown, is the main reason most of these small businesses struggle to secure funds.

A third of 2.2 million MSMEs which shut down in five years through June 2016 blamed shortage of operating cash, according to a Kenya National Bureau of Statistics study of October 2016.

The findings of the KNBS Micro, Small and Medium Establishments study, which estimated the lifespan of the MSMEs in the country at 3.8 years, showed only 5.6 per cent of them secured funds from commercial banks.