Nakuru County Government has launched a Sh 500 million loan facility to cushion the Small and Medium Enterprises (SMEs) from the coronavirus pandemic economic aftershocks.
Governor Lee Kinyanjui said though SMEs are the driving force of economic development in the devolved unit accounting for 90 per cent of all businesses, 50 per cent of employment, and 40 per cent of Gross Domestic Product access to affordable finance remains a challenge to many.
Speaking at the County headquarters, Mr Kinyanjui noted that though big financial institutions play a critical role in growth and development in the SME sector, there were concerns over the cost of financing SMEs in terms of interest rates offered.
He was flanked by County Executive Committee Member for Trade, Tourism and Cooperatives, Mr Raymond Komen and Kenya Institute of Business Training (KIBT) Regional Business Training Officer Francis Munyua.
“Despite their important contribution, this sector has continued to face challenges of accessing credit, due to lack of sufficient collateral, high cost of credit, and informal business structure. These challenges have been worsened by the Covid-19 Pandemic.
The Sh 500 million funding will strengthen our SMEs. There was no such programme before,” observed Mr Kinyanjui.
The governor added that with reduced turnover and Covid-19 disruptions in the market and supply chains, many Small and Medium Enterprises are unlikely to attract affordable and quality credit under the traditional arrangements.
Mr Komen said the loan facility seeks to empower women, youth and persons with disabilities through financial support for their enterprises as a way of reducing poverty and increasing household incomes within the devolved unit.
He added that the kitty shall be used to provide affordable loans or credit for business capital, provide skills and business development, facilitate technology acquisition and provide technical assistance in product and market development.
Mr Komen noted that a survey conducted by Kenya National Chamber of Commerce and Industry (KNCCI), the Ministry of Industry, Trade and Cooperatives and the International Trade Centre, had established that a third of SMEs in the country that needed funding failed to secure loans.
“The SME Competitiveness Survey said 33 per cent of small businesses indicated that their applications were either rejected, 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 Micro, 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,” stated the CEC.
He said the County Administration was partnering with KIBT in training over 2,000 Small and Medium Enterprises (SMEs) businesses on online marketing opportunities, record keeping, productivity and quality management, business registration and legal issues among others.
Mr.Munyua stated there was a growing need for entrepreneurs to join the digital market to expose Kenyan goods to the global market.
“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.
Online trading can help to make more goods and services available for consumers, increase market access for SMEs and encourage investments”, said the KIBT Regional business training Officer.
Mr Munyua called on the dominant small and micro enterprise sector in the country to exploit the increased online purchases for growth.
He added “There exists growth opportunities for entrepreneurs in the country in the e-commerce industry. However there is a need for policy makers to address factors such as high taxes and costly prices of data in some markets, made worse by relatively low income levels.”
By Anne Mwale and Catherine Karanja