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State moots credit plan for SMEs at grassroots

By Noel Wandera
Saturday, December 28th, 2019
Mobile loans. Photo/Courtesy

The State will introduce two more financial products to spur growth among small and micro enterprises (SMEs).

In his Jamhuri Day address yesterday, President Uhuru Kenyatta spelt out plans to introduce Stawisha SME Mashinani, coupled with administrative measures he did not specify, to haul the sector from the current challenges it is facing.

Uhuru’s pronouncement comes two months after Parliament repealed a cap on interest rates which earlier limited banks to charge customers four percentage points above the central bank’s benchmark rate.

Infrastructure projects

Introduced in September 2016, the cap regime inadvertently led banks to shy away from lending to SMEs in preference to risk-free government securities.

At least one million customers are feared to have been locked out of lending by banks in the four years the law had been in force.

“The repeal of the law capping bank lending interest rates, introduction of ground-breaking financial products such as Stawi, which is geared towards providing affordable credit to SMEs, has already positively impacted hundreds of business by availing low-cost financing, despite only having been launched recently,” said Uhuru.

Stawi is a mobile loan app that offers unsecured loans to SMEs of between Sh30,000 to Sh250, 000 at an affordable interest rate of nine per cent per year, payable within one to 12 months.

According to the Kenya Bankers Association, Stawi garnered 100,000 customers, who went on to borrow Sh100 million during its trial phase in May. 

It is managed by four banks; NCBA, Cooperative Bank, Diamond Trust Bank, and KCB Group.