Micro, Small and Medium Enterprises (MSMEs) play a vital role in the economic development of the country.
MSMEs account for the majority of businesses worldwide and are important contributors to job creation and global economic development.
The sector largely comprises micro-enterprises 98.3 per cent and contributes approximately 40 per cent to the Gross Domestic Product (GDP).
However, access to finance is a key constraint to MSMEs growth, it is the second most cited obstacle facing SMEs to grow their businesses in emerging markets and developing countries.
According to Micro and Small Enterprise Authority (MSEA) board chairman, James Weru, the sector has not received much to sustain them.
“MSEs have been the backbone of the economy, but like the sector has received much grass to be able to produce as much milk as we should,” he said.
He urged the State to operationalize the MSE Fund, which was set up to facilitate access to credit for small and medium-sized enterprises activated.
When the pandemic struck, the government launched a Sh10 billion Credit Guarantee Scheme to mitigate the impact of Covid-19 on Micro, Small and Medium Enterprises (MSMEs).
National Treasury and Planning CS Ukur Yatani, noted that Covid-19 pandemic disproportionately impacted MSME businesses and lending institutions.
Yatani stated that the reduced turnover and disruptions in the market and supply chains, has disabled MSMEs from attracting affordable and quality credit under the traditional arrangements.
“Interventions are therefore necessary to cushion the impact of Covid-19 on MSMEs,” he said, adding that the government has considered and approved the aforementioned amount to be released over the current and next financial year for onward lending to small firms.
The Treasury said that Kenya is keen to enhance access to affordable credit by MSMEs because of the critical role they play in the country’s economic development and employment creation.
“Commercial banks participating in the credit guarantee scheme will be compensated in the event that small firms are unable to repay the loans,” assured Yatani.
However, it seems that the kitty wasn’t not received by SMEs since it was given to the big businesses which have collateral to take loans.
The President had directed various players within his government to support the sector however, they have not been implemented prompting the collapse of some enterprises.
The proposed MSE Fund was set up to augment other funds such as the Youth Enterprise Fund, Women Enterprise Fund and the National Government Affirmative Action Fund (NGAAF), to facilitate access to credit to entrepreneurs who may not qualify for bank loans due to lack of collateral.
Banks have also acquired funding from international firms to help in funding the MSMEs.
For instance, Equity Bank Kenya is set to receive Sh5.66 billion from United Kingdom’s development finance institution for onward lending to small businesses enterprises.
The funds from the British International Investment (BII), formerly known as CDC Group, will help the bank boost business growth as well as the country’s economy.
Additionally, the International Finance Corporation has disbursed Sh1.7 billion loan to Guaranty Trust Bank Kenya to continue lending to SMEs that were adversely affected by the pandemic.
Family Bank also inked asset financing deal with Toyota Kenya to extend support to small and medium enterprises offering crucial services during the COVID-19 pandemic period by offering a loan facility for Toyota Hilux pick-ups and Hino trucks.
The financial institution is offering up to 95 per cent financing towards the purchase of the Hilux single and double cab pick-ups payable within 60 months.
However, the sector is still suffering financially since the banks are giving funds to big companies who have collateral.