The National Treasury is set to expand a scheme started in 2020, where it would guarantee loans offered to credit-starved micro, small and medium enterprises (MSMEs).
In the initial phase, the Treasury set aside Ksh3 billion and signed up seven banks for the scheme, KCB, NCBA, Co-operative, Absa, DTB, Stanbic and Credit Bank. However, out of the Ksh3 billion only 334 businesses accessed Ksh634.5 million.
The government is now seeking to expand the Credit Guarantee Scheme by onboarding more lenders and offering loans through mobile phones and other digital platforms.
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In the current year, Ksh1 billion has been added to the scheme, making the total cash available Ksh4 billion, with a plan to hit Ksh10 billion in the near future.
In case of a default, the state will cover 25 percent of the loan. Each loan is capped at Ksh5 million with a repayment period of 36 months.
The rollout of the second phase will include SACCOs and digital lenders, which will make the micro-loans more accessible to more MSMEs.
“We want to take advantage of the ICT infrastructure that is there amongst the telcos, which are also regulated (to broaden coverage of the scheme). The next coverage will, therefore, include SACCOs, microfinance institutions and, thereafter, the telcos,” director-general for Budget, Fiscal and Economic Affairs at the Treasury Albert Mwenda told the Business Daily.
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“Our expectations (for rollout of the second phase) is within this year, but you see there are those factors such as certain approvals that are beyond us.”
MSMEs account for more than 80 percent of all the businesses in the country and provide about 75 percent of jobs.
However, they have been in many cases denied loans by lenders due to the risk of default, with the state now seeking to de-risk the loans offered to them.
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