NAIROBI, Kenya, Aug 18 – Kenyan entrepreneurs are set to benefit from a Sh3 billion loan from a financial institution to help them in their business plans.
The non-bank finance company which operates in nine African countries will aid local businesses with show potential but lack the collaterals needed by the traditional lending institutions such as banks.
According to Grofin Services Chief Executive Officer for Africa Guido Boysen, the firm will fund 20 to 25 Kenyan businesses based on their viability rather than whether they have security for the loans.
“Unlike the traditional banks which require collateral in the form of assets, before lending money to businesses, we demand what the entrepreneurs can readily provide viability of the business and the seriousness and credibility of the managers,” he said.
“We are looking at about 20 to 25 deals this year with a maximum of Sh120 million for each business,” he said.
Boysen noted that the lack of business management skills, especially the inability to keep proper financial records, is the biggest challenge facing entrepreneurs in Kenya and other African countries.
He said most start-ups collapsed because of poor planning, lack of proper financial records and the diversion of funds to other ventures.
He however stated that the level of entrepreneurship in the country was impressive but urged for more mentoring and business support services for entrepreneurs.
“The level of entrepreneurship in Kenya is very strong,” he said. “Kenya is the engine of entrepreneurship in East Africa. I am very excited about Kenya.”
He said: “We address this problem by taking the viability based approach. We assess the viability of the business, look at the risks and opportunities and then provide finance and business support based on that.
Grofin operates in 12 countries in Africa and the Middle East and loans start- ups and existing businesses with viable business plans between Sh4 and 120 million.
“We sift through ten business plans a day and only ends up taking up maybe one business plan in a week,” said Boysen. “This is why we insist on developing the quality of entrepreneurs by offering support services on top of financing.”
He added that some businessmen tended to take money out of their business to fund other projects- like buying land, instead of reinvesting in the business.