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 MSMEs hold key to national prosperity

Enhancing the contribution of Micro, Small Medium Enterprises (MSMEs) to the economy through a package of interventions including an enabling business environment, access to affordable credit facilities and market is a key priority of the Kenya Kwanza administration.

Rift Valley Regional Commissioner Maalim Mohammed said the national government had stepped up its efforts to address mismatch of MSMEs’ needs and the design of the financing products on offer through establishment of the Financial Inclusion Fund (Hustlers Fund).

He stated that President William Ruto’s administration was also working on a framework of policies that will encourage MSMEs to grow and reduce their mortality rate.

Speaking at a Nakuru Hotel when he launched Public Participation for the National Treasury’s proposed Hustlers’ Fund, Maalim underscored the importance of MSMEs to the country’s economic development and job creation as stated in Vision 2030 and the Third Medium Term Plan (2018-2022).

Through the Hustler Fund, the Regional Commissioner noted that the national government was creating greater access to finance that will improve the survival of MSMEs and help them to move up their value chains.

“The fund was established to enhance access to quality and affordable credit for the growth and operations of MSMEs, which would otherwise find it difficult to access loans from commercial banks,” observed Mr. Maalim.

The government, he added, was also keen on facilitating the MSMEs to deepen their integration with the formal economy, particularly in manufacturing, agribusiness and services.

According to the Kenya National Bureau of Statistics, Kenya has over 7 million MSMEs, which employ some 15 million people across all sectors and account for roughly 40 per cent of the GDP.

MSMEs are also considered a driver of development since they cover a wide variety of activities in nearly all sectors of the economy.

Maalim directed all the 14 County Commissioners from the region to work with relevant state departments and other stakeholders in conducting financial literacy programmes and enhanced marketing on Hustler Fund to enable the youth acquire capacity to absorb the funds productively.

The public participation comes hours after Treasury CS Prof. Njuguna Ndung’u published regulations to govern the Sh50 billion Hustler’s Fund, under the Public Finance Management Act.

In a letter to outgoing Interior PS Karanja Kibicho three days ago, Treasury PS Julius Muia said: “The National Treasury has organized physical regional Town Hall meetings, to receive from members of the public any comments or inputs or memoranda they may have on the said Regulations”.

In his communication, Prof. Ndung’u asked the Ministry of Interior to liaise with County administrators to open town halls for the event on time as well as organize the groups for public participation.

“Invite all County Commissioners to attend as well as mobilize targeted groups and members of the public,” he said.

Maalim said due to its flexibility, the Fund will enable upcoming businesses to seek smaller loan sizes at a higher frequency than the traditional loans to enable them to take advantage of random opportunities that emerge in their spaces.

“Despite the fundamental role they play, MSMEs are unable to operate to their optimum level due to a multiplicity of challenges. One of the key constraints is limited financial access. Credit from financial institutions is limited due to stringent lending conditions by commercial banks and microfinance institutions. Requirements on collateral or security are way beyond the reach of this segment of businesses,” the Regional Commissioner noted.

The Fund which is set to be launched by the President on December 1, 2022 will be built from money appropriated by the National Assembly, income generated from interest and other charges such as penalties and earnings from investments.

The regulations indicate that banks, micro-finance institutions, cooperative societies, chamas, Saccos and other associations that hold funds will be allowed to borrow from the Fund for onward lending.

“The object and purpose of the Fund shall be to innovate, develop and deploy bottom of the pyramid financial services and products that are affordable, accessible and appropriate for the unserved and underserved persons, including credit, saving, insurance and investment products,” the proposed regulations say.

The Regional Commissioner indicated that credit products would be available to both individuals and firms.

Credit products will be available to small businesses on digital platforms at affordable rates to individuals and through chamas, groups, Saccos and cooperatives.

No citizen will be excluded from the credit system. They will, therefore, be eligible to access credit as they work their way out in paying their loans, added Maalim.

The process is expected to run up to November 16 in three different clusters. The process will involve both National and County representatives, County Assemblies and local MPs, sector groups and associations, cooperatives and SME associations.

In the ruling Kenya Kwanza manifesto, Ruto promised he would introduce a Hustler’s Fund to support small business entities.

According to the regulations published by the National Treasury, beneficiaries will be required to be above the age of 18 years and hold a Kenyan identification card to qualify for the loans.

For one to benefit, they should also be members of Micro, Small, and Medium Enterprises (MSMEs), SACCO societies, Chama and table banking groups, or any other registered association.

The funds will be administered by a Chief Executive Officer (CEO) who will be obligated to open and operate such bank accounts, with the approval of the Board and the National Treasury. He will also supervise and control the day-to-day administration of the Fund.

The Hustler Fund CEO will be appointed by the Treasury CS and will transmit to the Auditor-General statement of accounts relating to the Fund, prepare quarterly and annual financial and non-financial reports in a format prescribed by the Public Sector Accounting Standards Board and submit the same to the National Treasury, with copies to the Controller of Budget and the Commission on Revenue Allocation.

At the same time, in case one is found guilty of misappropriation of funds, failure to give information, or falsifying information, while applying for the fund, they will be fined up to Sh10 million or an alternative jail term of five years.

By Anne Mwale


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