SMEs
The government is seeking to establish a Kenya Credit Guarantee Company (KCGC) to enhance credit access for Micro, Small and Medium Enterprises (MSMEs) in the country.
Antony Njeru, a Principal Economist at the National Treasury said majority of MSMEs in the country have limited access to credit facilities due to lack of collateral and the KCGC intends to reduce the risks for lenders and encourage them to grant credit to MSMEs.
A credit guarantee company is a mechanism where a third party, who is the guarantor pledges to pay part or the entire loan to the lender in case the borrower defaults.
“Majority of Kenyans that run MSMEs are young people who lack collateral like log books and titles deeds. The KCGC will provide an alternative form of collateral by sharing the risks with the banks in case of defaults,” said Njeru.
He spoke on Tuesday during a public participation forum for the Credit Guarantee Policy and amendments to the Central Bank of Kenya Act held at the Machakos University.
The principal economist said the policy if adopted will help address some of the problems affecting MSMEs in the country especially on issues related to financing.
“Some of the reasons that prevent MSMEs from accessing credit is due to skill gaps, this policy also intends to cure such problems associated with MSMEs,” he said.
Geoffrey Momanyi, a Senior State Counsel at the National Treasury speaking at the same forum noted that majority of the MSMEs were operating informally making it difficult for them to access credit hence the need to have them registered.
“The policy also seeks to address informality in the sector by ensuring that all MSMEs are registered to access loans,” said Momanyi. He reiterated that KCGC will ensure sufficient collateral to MSMEs to enable them to operate optimally through access to loans.