Centafrique Limited Chief Executive Officer and Managing Partner John Mungai has called for greater financial literacy among small and medium-sized enterprises (SMEs) in Kenya to help them understand how to access finance before starting their businesses to avoid challenges arising from inadequate preparation.
Speaking during a SME Breakfast Meeting organized by Centafrique Limited in Nairobi that brought together key players in the entrepreneurship ecosystem, Mungai said many SMEs struggle to understand what financial institutions require, which type of financing best suits their businesses, and what they need to put in place before approaching potential financiers.
The business expert said the country needs to move beyond discussions about the availability of capital and focus more on preparing businesses to become finance-ready.
“One of the key challenges facing SMEs is not the lack of finance; it is the lack of readiness and knowledge to access finance,” he said.
The CEO said entrepreneurs need to understand the requirements of different financiers, maintain proper business records, and build a credible financial history before seeking funding.
Mungai said another challenge is that entrepreneurs sometimes assume debt is the appropriate solution for every business, yet enterprises at different stages of development may require different forms of capital.
He urged entrepreneurs to first assess their businesses and identify the most appropriate source of financing instead of pursuing funding simply because it is available.
Centafrique, he said, helps SMEs understand what type of financing is suitable for their stage of growth and what they need to have in place before approaching financiers.
The CEO also stressed that access to finance cannot be separated from access to markets.
“No bank, for example, will come to give you debt if you can’t show them that you have a cash flow in the future that will come to you to be able to repay,” Mungai said.
He added that entrepreneurs therefore need to consider the wider business ecosystem, including customers, markets, suppliers, and other strategic partners.
Mungai said Centafrique works as an intermediary between the demand and supply sides of the financing ecosystem, helping SMEs prepare for engagement with financial institutions while helping financiers better understand the businesses they seek to serve.
“We act as a bridge between SMEs and the financials to help them to get ready, helping businesses put in place information and documentation required by financial institutions, with the aim of reducing delays and repeated requests during financing applications,” he said.
Mungai said his organization is advocating for direct conversations between financial institutions and SMEs about financial products beyond conventional loans.
“Financial institutions may have a range of products capable of supporting businesses at different stages of development,” he said.
He said such engagement is important because SMEs do not always know the full range of financial products available to them.
Mungai said the forum was designed to bring together actors on both sides of the financing ecosystem and create practical pathways for engagement.
Mungai said Centafrique measures its impact by tracking the number of businesses that secure financing or access other financial products, as well as growth in turnover, employment, and supplier networks.
The company also tracks whether businesses increase their revenues and create employment after receiving support.
He added that the company sometimes advises entrepreneurs to change their business if it not delivering the desired results. “When it cannot work, we tell you to change and move to another business,” he said.
Mungai said Centafrique has worked with more than 3,000 SMEs over the past three years through partnerships with development organisations and its own SME pipeline.
“We have worked with 3,000-plus SMEs, and we track their progress,” he said.
Mungai said Centafrique considers the transformation of individual businesses among its most important measures of success.
He cited the growth of businesses supported by the company as evidence of the potential impact of targeted SME support.
“When you see somebody starting from their own residential house to a full go-down with more than 50-plus SMEs, for us, that is success,” Mungai said.
Mungai challenged banks and other financial institutions to develop programmes that help promising but unprepared SMEs become bankable.
He said financial institutions should strengthen the capacity of their staff to understand the realities behind SME financial figures rather than assessing businesses purely through numbers.
“There’s a need for upskilling of your people to understand the SMEs and SME ecosystem. It’s not about just the numbers. It’s about what is behind the numbers,” he said.
According to Mungai, some SMEs have viable business models and investment potential but require targeted support before they can meet conventional financing requirements.
“For some, they have good quality and a good pipeline that can be investable, with just a little bit of help,” he said.
He also pointed to foundations operated by major banks as potential platforms through which financial institutions could help SMEs become more prepared for commercial financing.
“Why don’t you package a program that you can focus on these SMEs who are not ready, help them fine-tune their businesses, and then they can be ready for you?” he posed.
Mungai argued that such an approach could create longer-term relationships between banks and growing enterprises.
The Centafrique CEO said stronger collaboration between entrepreneurs, financiers, markets, and ecosystem partners will be essential to expanding access to sustainable finance.
He said SMEs already represent the demand side of the equation, while financial institutions have products and capital, but greater understanding and coordination are needed to connect the two effectively.
The company plans to continue engaging SMEs through forums and individual support as it seeks to expand its pipeline and strengthen its role in Kenya’s agriculture and wider SME ecosystem.
By Ian Chepkuto
