By Joy Kyalo
President Uhuru Kenyatta has said that his administration has made attempts especially during the Covid-19 crisis of creating a robust population of ‘Owners of Capital’ who are more than the ‘Earners of Wages’.
He said that they began by cushioning small-scale businesses through fiscal and monetary policy measures.
“These include the implementation of the Eight Point Economic Stimulus Programme of KSh. 56.6 billion. I unveiled this as part of the national response to the COVID-19 Pandemic. And, together with other fiscal policy measures, it has mitigated the adverse economic effects of the pandemic on businesses,” he said.
He added that these interventions bolstered purchasing power and increased earnings.
Similarly, businesses were saved by our reduction of the corporate tax rate; incentivizing them to retain their staff establishment. But fundamentally, these fiscal measures, coupled with monetary policy measures have had a positive impact on businesses in many ways.
“Lowering of Central Bank rate from 8.25% to 7.0% has made credit easily available to businesses. And, the lowering of the cash reserve ratio from 5.25% to 4.25% has provided extra liquidity to the banking sector. This has availed liquidity to the tune of KSh. 35 billion, further enhancing greater access to credit,” he added.
The dividends of these monetary policy interventions are manifest in the general reduction in the cost of credit, which now stands at its lowest rate at 11.7% compared to 1980 when it was 12%, shuttering a forty-year record.
Further, his administration recognizes the significant contributions made by micro, small and medium-sized businesses enterprises towards our economy; with the sector accounting for nearly 80% of our country’s employment and output.
However, it is evident that lack of adequate and affordable credit is a significant encumbrance for MSMEs due to their inability to raise collateral, it has been difficult for these enterprises to expand and realize their full potential.
Aware of this fact, and working together with our commercial banks, he said that the government has established a KSh. 100 Billion Credit Guarantee Scheme to provide partial mitigation of the default risks associated with micro, small and medium-sized business enterprises.
The aim of the initiative is to enable these business enterprises access affordable credit and protect the jobs they have created.
He urged the partnering financial institutions to levy interest at single digit on all facilities extended to Micro, Small and Medium Enterprises under the Credit Guarantee Scheme so as to share in the benefits of the shared risk between the government and the participating banks.
Additionally, and to make it easier for micro and small traders to engage in international trade, he said that the government has established a dedicated Transit Shed at the Kenya Railways, Nairobi; dedicated as the clearing point for cargo imported specifically by micro and small traders.
This will not only eliminate delays in clearing of goods which lead to higher costs, but will also allow easier push to market as well as joint importations.
He concluded that these interventions, micro and small traders will realize higher turnovers and have an even greater opportunity to thrive and expand.