Capital Markets

Microlender Jijenge raises security margin to cut insolvency risk

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Jijenge Credit chief executive Peter Macharia. FILE PHOTO | NMG

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Summary

  • Microlender Jijenge Credit has increased its security margins to avoid sinking into insolvency amid growing quick loan requests on resumption of business following the easing of coronavirus lockdowns.
  • The lender has witnessed increased loan requests from micro, small and medium-sized enterprises (MSMEs) who make up most of its customers since July 6 when President Uhuru Kenyatta eased the restrictions.
  • Jijenge Credit chief executive Peter Macharia said the lender has had to vary its security margins to accommodate more customers while staying afloat.

Microlender Jijenge Credit has increased its security margins to avoid sinking into insolvency amid growing quick loan requests on resumption of business following the easing of coronavirus lockdowns.

The lender has witnessed increased loan requests from micro, small and medium-sized enterprises (MSMEs) who make up most of its customers since July 6 when President Uhuru Kenyatta eased the restrictions.

Jijenge Credit chief executive Peter Macharia said the lender has had to vary its security margins to accommodate more customers while staying afloat.

“Instead of doing 50 percent, we are now doing 30 percent, meaning that if initially we lent to 50 percent value of a car, we’ve reduced that to a lower percentage,” he said.

By widening the margin between the amount of the loan and the value of the security, the lenders are able to lend to more customers.

The lender, with over 20,000 customers—50 percent of whom are MSMEs—has intensified vetting on loan applications and increased background checks on customer income sources.

The firm concentrates on motor vehicle asset financing, where a client identifies a vehicle and deposits either 20, 30 or 50 percent of the total cost and Jijenge Credit pays the balance.

Movement restrictions imposed in March, resulted in low cash inflows compelling the lender to restructure 80 percent of its loan repayment plans.

“Since April we have restructured almost Sh100 million loans,” said Mr Macharia.

MSMEs are estimated to contribute about 33 percent of the gross domestic product (Sh3 trillion out of the country’s output of Sh8.9 trillion in 2018).