What Kenya’s 2019-20 Budget Has In Store For The Youth And SMEs

By  |  June 14, 2019

According to a survey carried out by the Kenya National Bureau of Statistics (KNBS), 2.2 million Micro Small and Medium Enterprises (MSMEs) did shut down in a period of five years up to 2016. These businesses closed shops largely due to lack of funding.

A closer look into the 2019- 20 budget shows there is hope for business owners in regards to credit access. A number of funds have been set aside for these SMEs based on the sector they fall under.

“In this budget, I have set aside Ksh 2.0 billion for the National Value Chain Support Programme; and Ksh 3.0 billion for setting up the Coffee Cherry Revolving Fund to implement prioritized reforms in the coffee sub-sector,” Finance Minister Henry Rotich said while presenting the 2019/20 financial year budget in parliament yesterday.

Moving forward, coffee farmers countrywide will be able to access the Cherry Advance at a modest interest rate of 3 percent.

The government has also allotted USD 17 Mn to support the growth of SMEs in the manufacturing sector.

The Finance CS also revealed that the government will be launching an “SME Credit Guarantee Scheme” in a few weeks’ time, in a bid to deepen access to credit by SMEs without being subjected to complex application procedures and collateral requirements like has been the case for a long time. This together with Biashara Kenya Fund and SME Fund is expected to address the very reason why interest rate caps were introduced.

In order to boost efficiency and eliminate overlaps, Uwezo Fund, Youth Enterprise Development Fund and Women Enterprise Development Fund were consolidated to one major fund known as Biashara Kenya Fund. The Fund will give special priority to businesses owned by youths, women and people living with disabilities.

“In this current financial year, Government supported sugar farmers by paying USD 21 Mn debt for cane deliveries to public mills. To cater for the outstanding balance, we have provide for USD 7 Mn. Other provisions include USD 10 Mn for crop diversification and to revitalize the Miraa industry; USD 8 Mn for the rehabilitation of Fish Landing Sites; and USD 7 Mn for small-holder dairy commercialization. I have also allocated a total of USD 78 Mn for ongoing irrigation projects,” Rotich stated.

In an effort to “unlock credit to the private sector and in particular to the MSMEs,” The finance CS reproposed the amendment of banking amendment act 2016, a part that deals with commercial lending rates.

“I am in this year’s Finance Bill proposing a repeal of section 33B of the Banking (Amendment) Act, 2016, ” Rotich said.

His proposal comes after he made a similar recommendation while releasing the 2018/19 budget. The earlier proposal flopped. For an amendment proposal to be implemented, it has to go through parliament, the initial proposal failed to be implemented as members of parliament indicated they will not repeal the law.

The aforementioned reforms are expected to not only address shortcomings in the credit market but to also catalyze provision of credit.

The measure which introduced in August 2016, reportedly exacerbated a slowdown in credit growth to the private sector, which was 2.8 percent in April from 13.5 percent three years ago.

As for the youth, the government has set aside USD 1 Mn as seed capital for ‘Ajira Fund’. The Fund is expected to promote growth of local business that generate digital and digitally-enabled jobs.

The Ajira Fund is a facility under Ajira Digital Program, which was formed through a partnership between the Ministry of Information, Communications and Technology and Academia, Civil Society as well as the Private Sector.

Ajira Digital Program” aim is to bridge the gap between skills available and skills demand. A major objective of the program is to enable over one million youths annually to be engaged as digital freelance workers.”

Featured Image Courtesy: Aga Khan Development Network

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