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Kenyan SMEs to get collateral free loans

NAIROBI, Kenya, Jul 7 – Small and Medium Enterprises (SMEs) many soon access funding from banks without collateral.

The African Trade Insurance (ATI) Agency disclosed on Wednesday that it was developing a product where specific banks can accept their insurance cover as security for financing the SMEs.

Once implemented, the move would not only enable banks to lend more money to this sector but also assist small firms to minimise the effects of the credit crunch on their businesses.

“This product could help ensure that SMEs no longer have to put away large amounts of cash or goods for collateral,” said the agency’s newly appointed Chief Executive Officer George Otieno.

The insurer said it had seen a surge in demand for political and credit risk policies among SMEs in the last three months of the year and expressed confidence that they would continue to underwrite more business throughout the year.

Since its establishment in 2001 by African States with the financial and technical support from the World Bank, ATI has supported investments and trade worth $212 million (Sh16.9 billion) in Kenya and over $2 billion across Africa.

The firm, whose membership currently consists of nine African countries, plans to undertake a study on what impact their support has had on Africa’s development objectives in their 10 years of operation.

“ATI is conducting a survey to measure our impact within Africa in terms of the foreign direct investments we have supported, impact we have had on SMEs that export to the international markets,” said the agency’s Chief Underwriting Officer Stewart Kinloch.

Findings from the survey will be released in 2011 and will help identify the financing gaps particularly at a time when many firms were still grappling with the effects of the global financial crisis as well as inform areas that they can target to counter the negative impacts.

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In a bid to be more effective and efficient in serving their clients, he added that they would install an electronic underwriting system by the end of the year, which would help improve the turnaround time for underwriting policies.

At the same time, Mr Kinloch said that despite the political activities in several African states over the coming months, ATI was confident that the insurer would not suffer major losses should there be political violence in these states.

“The governments themselves are shareholders in ATI and it is not in their interest to cause us a loss because if they do, we would liquidate the shares they have purchased in the agency and use their own money to settle the claims,” he explained.

This relationship that they have with Africa means that they can provide cheap insurance covers which has seen many non-members express their desire to join the network.

Cameroon, Ivory Coast, Benin, Gabon and Ghana are some of the countries which will be confirmed into the membership before the end of the year enabling the agency to expand its footprint on the continent. ATI is now considering opening a regional office in West Africa to facilitate the new entrants.

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