SMEs pocket 3.3 billion shillings under state credit guarantee scheme

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Economy

SMEs pocket 3.3 billion shillings under state credit guarantee scheme


The National Treasury building in Nairobi. FILE PHOTO | NMG

A total of 2,190 small and medium enterprises have received 3.3 billion shillings under the state-backed credit guarantee scheme in the year to June 2022, as the government’s plan to to reduce the risks of small traders started at a slow pace.

The National Treasury reports that businesses owned by people with disabilities, youth and women received 472.2 million shillings or 20.1% of total disbursements through the Credit Guarantee Scheme (CGS).

But disbursements are just a drop in the ocean for a country with more than seven million micro-small and medium-sized enterprises (MSMEs).

The credit guarantee scheme encourages banks to extend credit to borrowers they would otherwise refuse, confident that they will be compensated in the event of default.

Treasury data tabled in Parliament indicates that female beneficiaries of the CGS were 283, young beneficiaries were 150 and persons with disabilities (PD) were eight.

“However, in terms of the value of credit guarantees, the share given to businesses owned by women, youth and people with disabilities was 14.2%, suggesting that this category of borrowers receives on average smaller credit facility volumes,” the report said.

The fund was established in December 2020 to improve access to quality and affordable credit for the growth and operations of MSMEs, who would otherwise struggle to access loans from commercial lenders.

A select group of commercial banks provide the loans and can offset up to a quarter of default losses using liquidity provided by the Treasury.

The seven participating lenders are Absa, Credit Bank, KCB Group, NCBA, Diamond Trust Bank, Stanbic Bank and Cooperative Bank.

The loan limit is set at 5 million shillings per borrower with a repayment period of 36 months.

“The National Treasury will continue to work with Private Finance Initiatives (PFIs) to increase the number of beneficiaries in these categories. [women, youth and PwDs]indicates an annual report on the performance of the MSME credit guarantee scheme.

“In addition, the National Treasury will continue its efforts in collaboration with relevant agencies to build the capacity of this category of beneficiaries.”

The report shows that all three sizes of businesses – micro, small and medium – have benefited from the CGS, as reported by banks and the Central Bank of Kenya.

The Treasury said that of the 2,190 facilities granted under the CGS in the 2021/22 financial year, small businesses received 1,321, medium-sized businesses received 248 and micro businesses received 248. 561.

“In terms of plant value, small businesses received 2.29 billion shillings, medium-sized businesses (592.5 million shillings) while micro businesses received 431.9 million shillings,” said the Treasure in the report.

He attributed the proportion of credit guarantees given to micro-enterprises to the fact that their average loan size is lower than that of small or medium-sized enterprises.

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