CBK calls for speedy SMEs credit guarantee scheme

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The Central Bank of Kenya (CBK) is proposing a credit guarantee scheme to protect lenders and small businesses from the adverse economic effects of the pandemic.

Last year, the Treasury under the proposed scheme said it would offer a third-party credit risk reduction plan to lenders by doing away with a portion for losses on small medium-sized enterprises (SMEs) loans in the time default.  

“Given the critical role of micro small and medium-sized enterprises (MSMEs) in the economy, there is an urgent need for more interventions to support the sector, such as by a credit guarantee scheme to de-risk lending by banks and increase credit uptake in the sector,” said CBK governor Patrick Njoroge on Wednesday on a monetary policy committee meeting.

According to CBK, credit to the private sector has grown by 8.9 percent in the year to March and 7.7 percent in the year to February. The two growths are still below the ideal level of 12-15 percent to be able to support a stable economic development.

Borrowers facing challenges during this pandemic period and had active loans on March 2 have been advised by CBK to discuss with their Banks on ways of restructuring options on payment.

However, most banks require borrowers to provide letters from their employers showing salary cuts or layoffs as proof to be considered for the relief.

“You may visit any nearest branch to request for a loan relief through our loan officers. You will require a letter from your employer indicating a salary cut or job termination,” stated a notice from Co-operative.

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Anthony Kiratu is the Founder of Finsolutions. He is a financial analyst with over 5 years experience in research, investment advisory, valuation and financial modelling. Anthony is a member of the Institute of Certified Investment and Financial Analysts and Institute of Certified Public Accountants of Kenya. He is passionate about development of African Capital Markets through training of investors and dissemination of information for sound financial and investment decision making process. He is also a part-time lecturer in the Certified Investment and Financial Analyst course in the subjects of International Finance, Portfolio Management, Equity Investment Analysis, and Fixed Income Securities. Email: anthony@finsolutions.co.ke Contact: +254 780216631

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