NAIROBI, Kenya, Oct 27- Central Bank of Kenya (CBK) governor Dr Patrick Njoroge has called on banks to come up with products that will allow easy credit access by the Small and Medium Enterprises (SMEs).
Njoroge regrets that a lot of SMEs are still left out in accessing credit hence limiting their growth as most of them do not have collateral to take loans.
“Even though lending by banks to SMEs has increased, we still have some long way to go before we can even begin declaring mission accomplished in terms of providing finance to the small enterprises,” Njoroge noted.
He says product innovation by banks should not only seek to give more financial support to SMEs but also keeping financial risk at low levels.
At the moment, he noted, a majority of banks consider it more risky giving out unsecured loans and if so, give them with a lot of restrictions which keep out the small entrepreneurs.
Banks have also been urged to interact more with the small and medium enterprises as well providing training after on financial management.
“A recent report by the World Bank indicates that 41 percent of small and medium enterprises in low income countries; their biggest challenge is access to finance which hinder their growth. This obviously is much higher than the 30 percent in middle income countries and 15 percent in high income countries,” he noted.
The CBK Governor was speaking on Tuesday during the fourth Citi Bank Microfinance Awards 2015 which saw over 10 entrepreneurs awarded for success in innovative businesses.
Njoroge mentioned that the Central Bank will also continue with more reforms in the microfinance sector which has remained a great source of loans for SMEs.
“We still have the 2008 Act for Microfinance Institutions and it had been amended in various ways. But the bottom line still is that the efforts are to expand their foot prints of these institutions, enhance the soundness of their credit appraisal, financial integrity and to offer diversified product range to better serve their clients,” he said.