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Capital Markets

Most small businesses need Sh250,000 for virus recovery

The majority of micro, small and medium enterprises (MSMEs) require Sh250,000 in capital support to get back in shape
The majority of micro, small and medium enterprises (MSMEs) require Sh250,000 in capital support to get back in shape with only eight percent needing more than Sh1 million shot in the arm. FILE PHOTO | NMG 

The majority of micro, small and medium enterprises (MSMEs) require Sh250,000 in capital support to get back in shape with only eight percent needing more than Sh1 million shot in the arm, a new research indicates.

Forty two percent of firms that have suffered under the coronavirus-induced pandemic require between Sh50,000 and Sh100,000, while 17 percent of need between Sh101,000 and Sh250,000.

This means 59 percent of the firms surveyed need up to Sh250,000 to recover, the research carried out by Nairobi-based Viffa Consult shows.

Another 33 percent of the enterprises require between Sh251,000 and Sh1 million with the rest needing over Sh1 million, indicates the survey.

Most of the firms (58 percent) covered in the survey had sales of between Sh500,000 and Sh5 million, but the research also included firms (33 percent) with sales of between zero and Sh500,000. The rest of the companies ( nine percent) had sales that amounted to over Sh5 million a year.

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Most of recovery funds are coming from banks and firms that offer loans through the mobile phone without requiring collateral.

From the survey, banks were the biggest source of the financing with slightly over 50 percent of the firms surveyed taking that route. However, the proportion of the enterprises sourcing cash from banks had shrunk compared to last year when it stood at over 80 percent.

On the other hand, the roles of mobile wallets had climbed to nearly 30 percent of the entities covered compared to less than 20 percent in 2019.

“There is an increased uptake of mobile wallet as indicated by a nine-percentage point increase between 2019-2020 indicating a growing preference by SMEs due to its role in promoting financial inclusion with ease of access to loans without collateral requirements as well as convenience as major value proposition.

In May, the Central Bank of Kenya warned that about 75 percent of Kenya’s small and medium-sized businesses faced collapse within two months if they failed to get fresh funds from banks or equity partners.

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