Kenya Looking To Boost Economic Growth Through Credit Guarantee Scheme For SMEs
Plans are believed to currently be in the pipeline to put in place a credit guarantee scheme for Small and Medium Enterprises (SMEs) in Kenya by the country’s executive council. This move, as revealed by a senior government official, is aimed at fostering economic growth in the country.
Last week, Peter Munya, Cabinet Secretary in the Ministry of Industrialization, Trade, and Cooperatives, at a trade forum in Nairobi, the Kenyan capital, is reported to have divulged this information after reiterating the lack of access to affordable credit as one of the biggest challenges hampering the growth of the country’s SMEs.
During his speech at the launch of the SME FEST 2018 Success Conference, the government official highlighted the importance of the planned credit guarantee scheme to the nation’s overall economic growth, while also noting that it affords commercial banks the levity to advance loans to SMEs at an interest rate that is concessional.
Munya reaffirmed the government’s commitment to tapping into the potentials of the SMEs in creating wealth and employment opportunities. He also suggested that the Kenyan government is paying a lot of attention to this vital aspect of the country’s economy given that SMEs weigh in with around 20% of the Gross Domestic Product (GDP), while also creating most of the opportunities for employment.
The cabinet secretary also added that the government is poised to go through with the credit guarantee scheme on account of the importance of SMEs to the economy by virtue of their value-addition to local raw materials, as this will help the country significantly cut down on revenue losses due to export of raw materials and import of finished products. From his comments, it can be surmised that Kenya is raring to go on the subject of developing its cottage industries by exploiting the full potentials of its abundant natural resources.
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Echoing the thoughts of the cabinet secretary, Mathew Nyamu, Assistant Director of Industrialization at the Ministry of Industrialization, Trade, and Cooperatives, confirmed the commitment of the government to developing policies that will serve up incentives to big firms who outsource some of their work to SMEs. He remarked that SMEs are now facing competition from big foreign firms as a result of the liberalization of the country’s economy and it will do a lot of good to “protect local firms by enhancing their competitiveness and efficiency.”
Sachen Gudka, Chairman of Kenya Association of Manufacturers (KAM), drummed up support for the “Big Four Agenda” of the Uhuru Kenyatta-led administration; an agenda that has manufacturing as one of its main pillars. He re-emphasized the determination of the country’s local manufacturers to increase their share of the national wealth to 15 percent in the next five years, while also enjoying the side imminent side benefits in the form of increased employment opportunities. Gudka also hammered on the vital role which SMEs play in the machinery of a growing economy, as well as the need to bolster their growth across all sectors.
The National Treasury is expected to shoulder the responsibility of funding the planned SME credit guarantee scheme. It will also be tasked with the repayment of loans to banks in cases of default on loans by the SMEs.
On the backs of the imminent development, Kenyan SMEs can afford to be optimistic as the credit guarantee scheme, once launched, will offer some degree of respite in the area of accessing no interest or low-interest loans – a move that will make it possible for SMEs to quickly secure the requisite capital for business growth and expansion. This should also bring about the creation of numerous gainful employment opportunities and an overall boost of the Kenyan economy in the grandest scheme of things.
