Posted by: KENASVIT | March 28, 2011

3.8 Billion KSH Available for Micro and Small Enterprises

The long-awaited Micro and Small Enterprises (MSE) Fund was officially launched by the Government on March 14, 2011 at the Treasury in Nairobi. In attendance were, among others, Finance Minister Uhuru Kenyatta, Treasury Permanent Secretary Joseph Kinyua, Bank Directors, and representatives of Micro and small enterprises including KENASVIT’s affiliate in Nairobi – NISCOF.

MSEs Sector is the source of income for over 8 million people, who represent the majority of working Kenyans. However, this sector faces many challenges, such as financial exclusion and a lack of access to credit. As the Hon. Minister Uhuru Kenyatta stated at the Launch, the Government is now “taking the necessary steps to transform the MSE sector to be one of the key drivers for achieving a broad based economic growth, employment creation and poverty eradication.” The Government hopes that the Fund will play a key role in tackling unemployment, especially among youth.

The Government released Sh750 million to three commercial banks, forming the first disbursement of the MSE Fund. Equity, Co-operative and K-Rep banks each received Sh250 million to lend to MSEs at an affordable rate. Under the agreement, each bank will contribute five shillings to the Fund for every shilling provided by the government, meaning that the Fund will consist of Sh3.8 billion. The banks are required to assume the risk of the loans and of non-repayment and to ensure that loans reach MSEs quickly and at affordable rates. An additional Sh3 billion in loan funds are to be released by the Government at a later date, as well as Sh800 million which has been allocated for capacity-building in entrepreneurship for the MSE sector.

KENASVIT and other MSE representatives have been active in engaging the Government on issues related to the MSE Bill drafting and to MSE Fund implementation; In November 2010, the Ministry of Finance hosted the MSE Fund workshop with members of the informal economy and bank representatives, in which KENASVIT participated. The workshop sensitized the informal sector on the Fund, its implementation framework, government policy on the financial sector, and the need for financial inclusion of the informal sector. Workshop participants gave proposals with regard to the structure and accessibility of funds by MSEs, for instance; interest rates, bank monopoly and inclusion of the transport sector just to mention a few. A committee of Government, Bank and informal economy representatives was then formed to review and incorporate these proposals into a final resolution on the MSE Fund. KENASVIT and other MSE stakeholders are still engaging the government in attempts to fast-track the MSE Bill.

What the MSE Fund means for Traders:

  • Any registered micro and small enterprise, MSE association or umbrella organization can access the Fund
  • MSEs can now access loans for business expansion from Equity, Co-operative and K-Rep Banks
  • Borrowing will be set at an 8% interest rate, which is lower than commercial rates
  • Other specific terms of lending policy will differ between the banks
  • Borrowers will not be required to be a customer of any of the banks
  • Funds will be accessible at bank branches of the three banks countrywide
  • Individual members can also access the funds directly from the bank but the government is encouraging borrowing through groups for the sake of loan security
  • Association members who apply in a group will act as each others’ co-guarantors
  • Loans will be available on a first-come, first-served basis, so traders should visit a bank branch as soon as possible to ensure access to the Fund.

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