According to Equity Bank Managing Director Polycarp Igathe, if there is a subject that has been interrogated in all corners of the country ranging from churches, pubs, markets, banks and at cabinet level, it is the issue of access to credit for Small and Medium Enterprises (SMEs).
Igathe says that while SMEs are the biggest employers in the Kenyan economy, they have been denied the opportunity to grow and create more jobs as banks continue tighten the purse strings by deeming SMEs as likely defaulters.
Speaking at the Kenya Association of Manufacturers’ (KAM) Changamka Festival at the Kasarani Stadium on Wednesday, Igathe opined that as a country, we are too pre-occupied with the supply side of economics and paying zero attention to the demand side hence the predicament the country finds itself in.
“If money is not circulating within the economy that basically means that no jobs will be created. Every time I interact with leaders in the banking industry we come to the conclusion that if no one accesses credit, it has a spiral effect on the entire economy,” said the former Nairobi Deputy Governor.
But Igathe promised that the dark skies that have been clouding access to credit for small businesses are clearing saying that banks are now warming up to the idea of advancing loans to SMEs.
“We are ready to unleash the money and ensure that Kenyans have access to capital, “added Igathe.
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SMEs were also handed a boost on Thursday when President Uhuru Kenyatta revealed that the government is in the final stages of setting up an SME guarantee scheme as a measure to make it easier for banks to advance credit to business owners without collateral.
The scheme will ensure that banks will no longer use risk as an excuse to starve SMEs off credit and will also have to reduce the rates at which they lend to SMEs.
For now, the businesses are still accessing credit at exorbitant rates as the High Court’s ruling that declared capping of interest rates illegal remains suspended for 12 months till March next year.
Since interest rates were capped at 4% above the Central Bank’s base lending rate in 2016, banks have accused parliament of interfering with the Central Bank’s monetary policy control mandate.
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A huge chunk of politicians led by the law’s chief proponent, Kiambu Town MP Jude Njomo have accused banks of preying on Kenyans by advancing credit to them at ‘exorbitant’ rates.
The main issue however is that since the law was passed, SMEs have lamented that lack of access to credit has hindered their business operations.
