Kenya Commercial Bank (KCB) CEO Joshua Oigara identified the state-backed credit guarantee scheme as a great resource for medium and small enterprises looking to stay afloat or thrive in 2021.
Offering an outlook for the new year as part of conversations with the Kenya Bankers Association (KBA), Oigara described the newly launched scheme as ‘the most exciting part of innovation during the pandemic by financial institutions’.
He noted that the scheme offered SMEs with no security and inadequate cashflow access to affordable credit, cushioning their businesses from the shocks of Covid-19. Oigara further noted it was the first scheme of its kind in the region.
KCB is among participating banks set to extend credit to SMEs after the government through the Public Finance Management Regulations (2020) set up the Ksh3 billion stabilization facility. To qualify, businesses will be required to meet requirements including compliance with tax obligations and business permits as well as having a good credit standing.
The other participating banks are Absa, Co-op Bank, Credit Bank, DTB, NCBA and Stanbic.
“The credit guarantee scheme which is the first across the region is a very exciting initiative set up between the banks, the Central Bank and the National Treasury.
“In many ways small customers or what we call SMEs who have no access to credit because of no security, because their cashflows are not strong enough, get a chance to qualify,” Oigara noted.
KBA CEO Dr. Habil Olaka also welcomed the introduction of the scheme and the role of the banking sector in reviving a depressed economy.
“The government put in place a Ksh3 billion scheme, with this the banks can leverage on it and extend almost four fold the amount of the scheme in terms of lending to deserving SMEs,” he stated.
At its core, the credit guarantee is as insurance for lenders, allowing them to extend loans to high-risk borrowers.
Many businesses in the country were forced to close down or undertake cost cutting measures to stay afloat in 2020 following the onset of the pandemic.
Various restrictions saw demand and sales slump significantly in various sectors including hospitality, real estate and retail.
Oigara expressed confidence that banks would play an instrumental role in helping customers secure their livelihoods in 2021 despite the uncertainty.
“I would say to clients of the industry that the banking sector will stand for you as we have always done, until our customers can come back into their businesses as before,” he stated.
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