NAIROBI – Metropol Corporation has set the stage for the launch of a new rating initiative that will boost access to financing by micro, small and medium size enterprises (MSMEs).
The credit reference bureau said it will be rating small businesses and allocating them credit scores, which they will use in raising funds from financial institutions or through the stock market. Speaking today at a prelaunch seminar to reach a categorization model for micro, small and medium enterprises, Metropol Managing Director Sam Omukoko said the move was timely since banks were now sharing credit information on their clients.
“The categorisation is in two parts of micro and small and medium size segments,” he said at the workshop held at Panafric Hotel in Nairobi. “Now it will be easy for rated companies to engage with banks and financial institutions.” The rating will be launched in early May this year. He said lenders will be able to rank the credit risk of MSEMs and price their loans according to the scores, which will in turn reduce defaults and lower interest rates.
“Pricing of loans will be based on credit history and for the first time banks will be able to price their loans,” he said. “A low grade will mean a high risk borrower and of course tough lending conditions. This will force many companies to profile their credit history and maintain good repayment record to be able to negotiate good terms with lenders.”
The initiative is being supported by the Ministry of Labour’s department of MSMEs, Kenya Industrial Estates, Central Bank’s Kenya Credit Information Sharing Initiative, the Kenya Bankers Association among other public and private partners. It targets businesses that have been in operation for at least two years.
The participants agreed on turnover, investment and number of employees as the statistical values to be used in the national categorization of MSMEs. “Some countries use one value, while others use a combination of two,” said Mr Omukoko. “We want to make ours robust and more reliable.”
The director of MSMEs at the Ministry of Labour Jane Aranga, who opened the workshop, urged companies to profile their credit history, as it would help them secure affordable financing for growth. She noted that MSMEs accounted for 18 per cent of the country’s total GDP and provided 80 per cent of the jobs, making the segment critical to the attainment of the objectives set under Vision 2030.
“Credit is never categorised as a business development service,” he said. “Credit rating now recognises the crucial role it plays as the entry point of initiating business development.” She said credit rating will enable MSMEs to access affordable credit.
Mr Omukoko said MSMEs rating will reduce turnaround time for loan applications as information on applicants would be readily available to lenders. Collateral conditions will also be relaxed for companies will low credit risk, he added. “Banks can now come up with tailor-made products for MSMEs with different repayment periods to suit this market,” he said.
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