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Record keeping, sustainability, transparency key to securing finance for SMEs: Forum

Over 50 SMEs gathered at the Strathmore Business School on Friday to discuss and share their experiences in SME financing.

Nairobi, Kenya, Apr 30 – Credit to small and medium enterprises has continued to contract especially after the introduction of interest rate capping in 2016.

Over 50 SMEs gathered at the Strathmore Business School on Friday to discuss and share their experiences in SME financing.

Organised by Invest In Africa Kenya, the SMEs explored whether there is a gap in SME financing and how businesses can source start-up, operating and expansion capital.

The purpose of the forum was to foster the participation of and dialogue between SMEs and financiers on perceptions biases regarding SME financing if any and gain consensus on the way forward towards advancing the SME financing agenda in Kenya.

Perceptions about SME financing have metamorphosed over different sectors and these have influenced the behaviour of both SMEs and financiers. On one hand, financiers are perceived to have stringent lending conditions while on the other hand, SMEs are perceived to be a “risky lot.”

Some of the conversation angles discussed included:

  • Are there mistaken assumptions about SME finance?
  • Is the said huge SME financing gap a myth or a reality?
  • Do commercial banks understand how to finance SMEs?
  • Are SMEs in Kenya Investor ready?
  • Do SMEs really understand how financing works?
  • Are all avenues explored or can more be done to improve access to finance?

Speaking at the forum, IIA- Kenya Country Manager, Wangechi Muriuki pointed out that “Small and Medium Enterprises (SMEs) are the key drivers of growth in the Kenyan economy, creating about 90oc of new jobs every year and contributing to about 25% of the country’s GDP.”

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The growing attention and interest regarding SME development in Kenya has led to a more diversified pool of targeted funding options for SMEs ranging from debt to equity financing.

More and more DFI’s are extending credit lines to commercial banks for lending to the SMEs while there is remarkable growth registered in Equity funding in the form of venture capitalists, angel investors, private equity funds, grants among other initiatives.

“Despite the growing number of targeted efforts for financing SMEs, the lack of ‘Access to Finance’ continually emerges as a critical factor affecting the growth and scaling up of SMEs in Kenya. It remains one of the most debated topics on matters SME”, she added.

Equity Bank’s Director of SME Banking Philip Sigwart highlighted that banks are generally considered to be averse to risk. He, however, noted the importance of protecting depositors’ money as this is what is used to on-lend to those seeking credit facilities.  He stated that Equity Bank disburses facilities amounting to Sh4 – 5 Billion monthly to SMEs.

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Jeff Alondo, Head, Enterprise Banking, Stanbic Bank noted that 90pc of SMEs in Kenya have access to finance from various sources. However, a considerable number do not keep records nor have business plans.  Many of them do take a long-term sustainability view of their businesses. He maintained that every SME should aim to build a company that will outlive them.

Martin Kiilu, Lead at Intellecap Impact Investment Network emphasized on the importance of developing a business vision. “Investors are not just looking for businesses to invest in but visions to invest in”, he said.

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From an SME perspective, Myke Rabar, the CEO and Founder, Homeboyz Entertainment advised SMEs on the importance of being trustworthy to enable growth and business partnerships.

He also reiterated that his company grew organically because of the unique nature of his business. He urged SMEs to capitalize on the finance options currently available based on the different stages of growth that the company lies in.

Hadija Jama, Director, Darubini Screening Company Limited highlighted the importance of background checks and various screening interventions that SMEs can employ in their business to improve on their credit score and competence.

Professor Geoffrey Injeni, Faculty and Consultant at Strathmore Business School accentuated that they have training programs that assist SMEs to become investor ready and are working with customers of some financial institutions.

Their focus is based on research led studies and business cases. This provides a more practical approach for SMEs to improve their businesses.

Invest In Africa is working to enhance SME access to skills, markets and finance in partnership with both leading organizations in Kenya in order to drive job creation and enterprise development in the economy.

Together with its Partners, IIA has built a unique, world-class online technology platform – The African Partner Pool (APP) that currently has a cross-sector database of over of over 1,300 vetted SMEs from Kenya.  The platform directly connects SMEs with larger organizations sourcing for goods and services locally and also offers capacity building to enable address existing skill and knowledge gaps.

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IIA Partners with Tullow Oil, Equity Bank, EY, Clyde & Co, Ecobank, Safaricom, Shell, Nation Media Group, AMSCO, Strathmore Business School, Keninvest, KEPSA among others.

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