The Capital Markets Authority (CMA) has proposed mandatory listing on the Nairobi Securities Exchange for Small and Medium size business eyeing funds as part of the economic stimulus to cushion against the Covid-19.
CMA Director for Policy and Regulation, Mr. Luke Ombara said that the listings would improve transparency and corporate governance measures in the utilization, limiting the risk of loss and ensure repayment of the same.
“We are in the process of making a proposal to consider provision for mandatory listing by MSMEs (micro, small and medium-sized enterprises) qualified to access funds from the government’s credit guarantee scheme as a measure of promoting corporate governance and transparency in the use of proceeds for business growth, subject to stakeholder engagement and participation,” Mr. Ombara said.
The regulator has also proposed a waiver of listing fees for small businesses to protect them from incurring extra costs. Small businesses normally pay a listing fee of between Kshs 75,000 and Kshs 150,000.
The National Treasury had earlier announced an economic stimulus of Kshs 10 billion to guarantee commercial loans for SMEs to cushion them against the economic shocks of the coronavirus crisis.
A cabinet resolution in September 2019 proposed the disbursement of funds in two tranches until the financial year 2021/22.
However, the decision by CMA to list firms on the bourse has faced criticism from SME players claiming the regulator is putting hurdles for access to the funds.
“This is putting hurdles on top of hurdles. SMEs require fast cash and introducing bureaucracy will turn them away. Subjecting them to bureaucracy will force them to continue operating in the informal space. That is why we are calling for seven years to operate without bureaucracy and complications,” Kenya National Federation of Jua Kali Association CEO Richard Muteti said.
The scheme to assist SMEs comes with pre-conditions that firms willing to access the funds must have an annual turnover of Kshs 100 million and a workforce of between 51 and 250 workers.
Through the Public Finance Management Bill (2020), the National Treasury said that it will not fully guarantee the loans and SMEs will be required to provide collateral include capital assets such as machinery and property.
Under the arrangement, the State will be paying an undisclosed percentage of the losses in case the SME defaults the commercial loan reducing the risk associated with SMEs.
If the CMA proposal is approved, SMEs are set to benefit and unlock the much-needed credit for the Covid-19 post-recovery measures.
The CMA listing annual listing strategy under the Growth and Enterprise Market Segment (GEMS) has not borne fruits since its launch.
The strategy was expected to list at least 19 firms by 2017 and 39 by 20223 and has only attracted five firms since its launch in 2013.
This includes the successful listing of Home Afrika, Flame Tree, and Kurwitu Ventures.