11 April 2014

Kenya: Slow SMEs Growth Threatens Job Creation - -Songa

The government's ambition to create a million new jobs for the youths annually might not be realised unless the almost stagnant micro, small and medium enterprises are facilitated to grow, industrialisation Principal Secretary Wilson Songa warned yesterday.

Songa said the dominant MSMEs were grappling with limited access to loans for growth and skill gaps for development despite being the indisputable engines of innovation, wealth and job creation.

"We need to think out of the box to address access to credit which is limiting young entrepreneurs to grow their creativity and innovation capabilities, " the PS told an MSMEs conference on access to credit in Nairobi. "Banks need to intervene with a stream of appropriate products to support them."

The sector is largely viewed as risky by majority of lenders.

A preliminary study on Structured Credit Guarantee Schemes in November 2011 by Strategic Business Advisors (Africa) for example established that MSMEs were facing up to Sh500 billion in financing gaps for their expansion.

The study mapped 40,000 formally registered SMEs(Sh10 to 100million in capital base) whose exposure to credit financing was estimated at about Sh50 billion against a demand of Sh250 billion.

The close to 300,000 micro enterprises (less than Sh10 million in capital) were nonetheless worst hit with their estimated funding demand at a staggering Sh225 billion.

Kenya Bankers Association's chief executive Habil Olaka said despite Kenya being ahead of continent's economic power houses--South Africa and Nigeria--in lending to MSMEs, there was "still big room" for improvement.

KBA, he said, would help many banks that are continually growing their loan portfolio to the sector to get market information on what customers want to help them develop appropriate products.

Songa and Olaka however urged MSMEs to take advantage of full file credit sharing mechanism through the two licensed credit reference bureaus to negotiate for better loan terms.

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