Credit Access Facility Launched in Kenya
Friday, August 19, 2005
A Ksh1.7 billion ($22) million credit access facility has been launched in
The chairman of the Kenya Private Sector Alliance, Manu Chandaria, said the project will focus on value chains and enterprises with high potential for growth, including integration from informal to formal businesses.
“We must help SMEs [small and medium enterprises] graduate to the next level and be able to absorb more resources. This will enhance their productivity and lead to increased growth and development,” said Dr Chandaria.
The facility will increase the sector’s performance in employment creation and economic growth after years of constraints brought by lack of access to credit, information, skills and business development services, he said.
While the over 40 commercial banks in Kenya have enough liquidity to set in motion significant growth in the small business sector, these institutions often lack the necessary know-how to lend effectively to this segment.
This has seen major banks concentrate their lending on corporates, largely due to the high nature of collateral that they ask for.
Small borrowers, including SMES, are unable to meet the relatively high collateral requirements sought by banks before they can get access to credit, thus limiting their growth.
And although entrepreneurs in this sector may have the resilience and work ethic, surveys show that the broad lack of access to credit has frustrated their efforts.
According to the recent Economic Survey, it is estimated that
This year, the government has assigned the SME sector an annual growth target of 12 per cent to enable it to generate an additional 4.4 million jobs in the next three years.
Compared with its neighbours,
The scenario has left the main responsibility for job creation with the un-organised sectors, including SMEs and the service sector.
PriceWaterhouseCoopers’ lead economist for
For a long time, SMES have relied on microfinance institutions, but of late the mainstream banks have began lending to the sector, although in a limited way, based on their creditworthiness, track record and business prospects.
This improved access to credit facilities is expected to boost their performance.
Standard Chartered Bank, K-Rep Bank and Equity Bank have led the way, with StanChart having established a fully fledged department of SME banking.