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Need To Support MSME Credit
Micro, Small and Medium Enterprise (MSME) are a cornerstone of Kenya’s economy, contributing approximately 40% to Kenya’s Gross Domestic Product (GDP) and employing nearly 14.9 million people across diverse sectors.
Despite this critical economic role, MSMEs face formidable barriers in accessing formal financing. Of an estimated 7.4 million MSMEs in Kenya, only 1.5 million are formally registered, presenting a challenge for financial institutions when assessing their credit worthiness. Informal operations, limited collateral, and sparse credit histories hinder lenders’ ability to accurately evaluate the financial viability of these enterprises.
In this regard, the Credit Information Sharing Association (CIS) in partnership with the Japan International Cooperation Agency (JICA) and CreditInfo, held an insightful dissemination workshop that brought together a range of organizations that support Micro, Small and Medium Enterprise (MSME).
Need To Support MSME Credit
The workshop, under the theme dubbed “Supporting MSME credit: Leveraging CRB data driven solution” demonstrated why lenders need to make great decisions to support MSMEs.
Sila Muthoka from The National Treasury noted that “The underpinnings of limited access for MSMEs include lack of collateral, high levels of informality, negative perception of the sector by the financial institutions, information asymmetry and inadequate loans and stringent loan terms”
Need To Support MSME Credit
The creditors can help MSMEs better manage risks, enable them to access a greater variety of risk management tools (including loans and savings), and give them confidence to take more productive, perhaps riskier, investment decisions.
Speaking during the engagement, Head of Consulting and Business Development at Kenya Association of Manufacturers Joyce Njogu noted that, “Looking at the situation in Kenya, there is a big gap on SMES accessing loans from the bank. There is need for financial literacy. Creating awareness and understanding of financial services processes and services available, including areas such as bank credit and insurance”
Need To Support MSME Credit
CIS Kenya CEO Mr. Jared Getenga “The National Treasury introduced a Credit Guarantee Scheme (CGS) to address credit access challenges by MSMEs and enhance sustenance of livelihoods. The objective is to create a conducive business environment and promote partnerships between the government and financial intermediaries with respect to credit guarantees for MSMEs and other related activities.”
In conclusion, improving incentives for financiers to share risks as well as reward and improving the relevance of finance in meeting diverse needs not just survival but also for growth would greatly impact the MSMEs.
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