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Government plans Loan Guarantee Scheme to keep SMEs afloat

The Government is developing a Partial Guarantee Scheme that will ease access to financing by Small and Medium-sized Enterprises (SMEs).

Speaking during the 7th Annual SME Conference and Expo at Strathmore University in Nairobi, Ms. Anne Mutahi, SME Advisor at the Office of the President said the programme would be in place by January 2020.

 “SMEs do not get the right kind of financing. We have been working closely with the Treasury to get a partial guarantee scheme, and it will be ready by January 2020.” Said Ms. Mutahi.

“What the Partial Guarantee Scheme is doing is that if a bank lends to an SME who may not have proper security, but a bank agrees to fund them, the bank will take some of the risks and the government takes part in the risks remaining.” she added.

Ms. Mumbi further said, “It will be a boost for the sector since the rapid rise of mobile-based loans as an avenue for SME financing has not helped, with the majority of these loans are short-term and limit long-term investments.”

SMEs in Kenya have been facing challenges in developing new products and financing existing customer orders due to lack of finance.

The survey by Kenya-based consultancy, Viffa Consult Ltd., which was released in April further showed that SMEs had a hard task of managing their businesses and paying utilities such as electricity and water.

The report also noted that the enterprises were further constrained by the government’s increased borrowing from the domestic market, hence edging them out and delayed payments to them by the National and County governments.

“SMEs are cutting back on non-critical expenses of marketing and physical expansion, with scarce finances being utilised to pay rent, salaries, water, and electricity,” said Victor Otieno, Viffa Consult Ltd Managing Director.

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