NAIROBI, Kenya, Jul 25 – Kenya Commercial Bank (KCB) plans to focus on tapping opportunities intrinsic in the Small and Medium-sized Enterprises (SMEs).
KCB Divisional Director for Retail Banking Catherine Njoroge says the SME sector has shown great resilience even in the face of harsh economic climate and presents the bank with an opportunity for growth.
"As a bank we will continue to explore all available avenues to empower our SME customers and our aim is to see them graduate into medium sized companies or even large organizations," she said.
Speaking in Malaysia during a trip with a group of businessmen in the SMEs sector, Ms Njoroge noted that opening up international business corridors for small scale entrepreneurs would allow them to network and find new opportunities for export and import.
Kenya\’s Ambassador to Malaysia David Gachoki Njoka who met the group at the Malaysia External Trade Development Corporation (MATRADE) urged the Government to increase support for SMEs.
Mr Njoka noted that such enterprises had seen many countries pull out many of their citizens out of poverty.
"The so called Asian Tigers have managed to scale heights of economic growth because the respective Governments have been able to recognize the important role played by small and medium enterprises in the overall economic development of these countries," he observed.
Mr Njoka noted that the Kenyan economy is driven by the informal sector which contributes close to 20 percent in annual national revenue, and creates more than 70 percent of new jobs annually.
He observed that the sector has the potential of contributing up to 45 percent of the Gross Domestic Product.
"This is a huge contribution to the national economic development which needs to be harnessed in an organized pattern to maximize on its potentials," he said.
The ambassador noted that for SMEs to create meaningful impact on economic growth proper institutional and financial structures need to be well articulated in Government\’s development plans.
"Through its Development Plan, the Malaysian Government has a programme that ensures maximum support for SMEs in areas of training, financing, advisory services, and marketing. Through the same plan, they have set up 38 agencies working under 12 ministries to coordinate the affairs of SMEs. This is how serious they are," he said.
In Malaysia SMEs account for more than 93 per cent of all the companies in the manufacturing sector; contribute over 27.3 per cent of total manufacturing output, 25.8 per cent to value-added production, own 27.6 per cent of fixed assets, and employ over 60 per cent of the country\’s workforce.
In Singapore there are about 148, 000 SMEs, making up 99 percent of all enterprises, contributing about 46percent to Singapore\’s Gross Domestic Product and employing 63percent of the workforce.
In Thailand SMEs has been the staple sector of the Thai economy contributing more than 40 to the country\’s gross domestic product (GDP), 99 percent of the total establishments in the country, and employing 69percent of the country\’s work force.
Noting that financing SMEs remains a challenge to most commercial bank due to their perceived risks, Mr Njoka urged the Kenyan government to provide guarantees to commercial banks willing to lend to the sector.
He has also urged financial institutions to be more flexible in their lending practices to the sector.
"Our financial system has to change from traditional securities practice. Here in Malaysia and most other Asian countries many loans are given without collaterals through a co-operative model, which Kenya is known for. Through such programmes, the borrowers are guaranteed by their group members," he said.
Mr Njoka challenged the government to ensure SMEs have enough cash flow by encouraging commercial banks to extend easier credit facilities to deserving SMEs instead of allowing banks to tighten or pull back facilities unnecessarily.
"The SME sector needs government support through training and provision of grants to help them find markets for their finished products as is being done in countries like Malaysia, Thailand, and Singapore," he noted