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Kenya

Credit Guarantee Scheme Targeting MSMEs To Kick off Operations Next Month

NAIROBI, Kenya, Sept 10 – The Cabinet Thursday said it approved the establishment of a Credit Guarantee Scheme with an initial seed capital of Sh10 Billion.

In a statement, the Cabinet Office said the scheme is aimed at enhancing access to credit by Micro, Small and Medium Enterprises (MSMEs) during the pendency of the COVID-19 Pandemic.

The scheme will be capitalized in two tranches of Sh5 Billion each in 2020/2021 and the 2021/2022 financial years.

“The State’s contributions are expected to be followed by contributions from Development Finance Institutions and participating commercial financial institutions; which are expected to boost the finding for the scheme to at least Sh100 Billion,” the office said in a statement.

The Credit Guarantee Scheme is expected to be operationalized by Mid-October, 2020.

According to the National MSME survey conducted in 2016, the MSME sector engaged about 14.9 million persons in 2015, arguably providing the highest number of employment opportunities in Kenya.

Earlier this year, the Director of Financial and Sectoral Affairs at the National Treasury said most MSMEs face credit challenges due to the nature of having non-bankable collateral.

Meanwhile, Kenya Private Sector Alliance noted that there is a Sh1.9 trillion financial gap and a potential demand of Sh2.4 trillion, making a case for the establishment of the scheme.

The operationalization of the scheme will be a fulfillment of President Uhuru Kenyatta’s promise to establish the fund as one of the economic interventions in addressing the COVID-19 pandemic.

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