Nakuru County administration is implementing a development model that seeks to enhance agriculture enterprise development and agricultural productivity and food safety by increasing financial access and inclusivity to farmers.
The devolved unit has also entered into partnerships with various financial institutions to enhance access to quality and affordable credit for growth and operations by Small and Medium sized Enterprises (SMEs), which would otherwise be unable to raise the required collateral for such loans and also face an uncertain and risky business environment.
Governor Susan Kihika said a number of SMEs in Nakuru have benefited from an interest rate that is lower than the participating bank’s average rate due to the reduction of risk exposure by a credit guarantee scheme put in place by the County administration.
A lot of farmers, she noted have had difficulties with farming due to challenges in accessing funding as most banks shy from lending to farmers due to high risks involved.
“By making credit facilities reliable and affordable to farmers, we purpose to increase agricultural yields, open sustainable supply chains for farmers and improve food security,” added Kihika.
Last year, the County Government signed a deal with Kenya Commercial Bank (KCB) which was aimed at offering training and affordable financing to over 2,000 Small and Medium Enterprises (SMEs) within the devolved unit.
Under the deal, the bank is to offer credit facilities at 12.5 percent interest per annum, out of which 5 percent was to be covered by the County Government while the remaining 7.5 percent was to be catered for by the borrower.
The County administration signed similar deals with the SBM Bank, Stanbic Bank and Diamond Trust Bank (DTB).
Speaking in her office after holding a meeting with a delegation from Absa Bank led by Regional Manager Mr. Arnold Ndungi, the Governor indicated that availing affordable finance to SMEs will provide a solution to one of the biggest problems faced by Kenya’s businesses, particularly those in the informal sector, of accessing credit to expand operations or withstand shocks during difficult times.
“Access to sufficient and affordable loans has remained a challenge for SMEs amid tight liquidity due to the aftershocks of the Covid-19 pandemic. The Central Bank of Kenya last year reported that at least 35 percent of micro-enterprises were wiped out by the Covid-19 pandemic by July 2021, exposing the vulnerability of businesses forming over 90 percent of Kenya’s economy- the micro and small enterprises,” observed Kihika.
The County boss assured entrepreneurs that her administration was formulating policies aimed at addressing SMEs’ short lifespan challenge, where most of the businesses don’t survive to their fourth year.
While indicating that her leadership was also working in collaboration with the County Assembly, national government and development partners to promote youth and women enterprises in the devolved unit, Kihika further said that the county government would continue to help farmers improve on their farming activities through financial support to boost food production.
“Youth and women entrepreneurship will go a long way in solving the employment challenge in Kenya. But a lack of investment, affordable access to finance, and quality business development services still present significant hurdles,” observed the Governor.
She said that the County Government was also bringing together relevant financial and non-financial partners to collectively support youth entrepreneurs through mentorship, coaching, knowledge and experience sharing.
Kihika asked financial institutions to realign their programs by assisting traders adapt to the new reality caused by Covid-19 pandemic.
“SMEs are the driving force of economic development in Nakuru County, accounting for 90 per cent of all businesses, 50 per cent of employment, and 40 per cent of Gross Domestic Product. Lack of sufficient collateral, high cost of credit, and informal business structure has rendered most SMEs ineligible for loans,” she stated.
Kihika said there was a growing need for entrepreneurs to join the digital market to expose Kenyan goods to the global market. He called on the dominant small and micro enterprise sector in the country to exploit the increased online purchases for growth.
“Now more than ever, we need to be innovative to help cushion businesses from the impact of Covid-19 pandemic. We will commit resources to support the initiative, to train vendors and give them the tools to sell online effectively,” stated the Governor.
Through the partnership, Ndungi affirmed that the two parties were keen to see local businesses grow beyond financial success to achieve greater social impact. He noted that a third of SMEs in the country that needed funding failed to secure loans.
A survey conducted by the Ministry of Trade and Industrialization established that 33 percent of small businesses had their loan applications either rejected, or opted not to apply due to high interest rates, collateral requirements and complex application procedures.
According to the World Bank report on SMEs entrepreneurs, women make up nearly half of all Small and Medium Enterprises owners and 40 percent of smallholder farm managers, yet they have less than 10 per cent of the available credit and less than one per cent of agricultural credit.
Ndungi urged Women and youth in small and medium-sized enterprises to embrace technology in looking for new markets, and communicating with stakeholders and potential clients.
“Online trading can help to make more goods and services available for consumers, increase market access for SMEs and encourage investments,” said the regional manager.
By Jane Ngugi