Tailored credit solutions still a challenge facing SMEs – Somo

Country-specific legal and regulatory frameworks also create additional barriers for enterprises.

In Summary
  • To date, a total of 52 loans have been disbursed by Somo to the women in their portfolio and 25 more women are in the pipeline to receive funding this month.
  • Total loans value disbursed stands at $139,258.58 (Sh20.3 million).
Somo's program manager Joshua Onialo.
Somo's program manager Joshua Onialo.

Women-led business environment in the country is showing promising signs of progress, with increasing representation and entrepreneurship.

However, persistent challenges impede their growth and value addition.

This is according to Somo, a nonprofit organisation that supports Micro Small and Medium-sized Enterprises (MSMEs) with access to finance, markets and training.

According to the firm’s programme manager Joshua Onialo, the unending challenges facing these businesses include limited access to capital, gender biases, inadequate mentorship networks and societal expectations.

Additionally, balancing family responsibilities can pose a significant obstacle for women entrepreneurs.

The Star spoke to Onialo on the potential to address these barriers amid its current funding program in the country in conjunction with Standard Chartered Foundation, dubbed the 'Women's loan fund'.

Why women's business financing

There is a large capital investment gap in Sub-Saharan Africa, where less than 20 per cent of women can access long-term financing from formal financial institutions.

About half of the seven million micro-enterprises in Kenya are run by women, mostly with a primary level of education. Country-specific legal and regulatory frameworks create additional barriers for women-led enterprises.

Across many countries, women have very little control over their assets and no ability to access large loans. Women-owned businesses are often considered ‘thin file’, meaning they have limited formalised business documentation or credit history on which to lend.

Women lack the collective bargaining power to challenge these legal environments, as well as the knowledge, tools and skills to advocate for fairer policies.

To date, a total of 52 loans have been disbursed to the women in our portfolio and 25 more women are in the pipeline to receive the low-interest loans in October this year. The total loan value disbursed stands at $139,258.58 (Sh20.3 million)

What counties have benefited to date and which are your next targets

We have effectively expanded this fund across Kenyan counties, such as Mombasa, Kwale, Kilifi, Kisumu, Nairobi, Kiambu, Kakamega and Busia, extending this loan to socially focused women-led businesses in our portfolio at a five per cent interest rate.

Our goal is to reach more counties in coming years seeking to empower at least 80 per cent of women entrepreneurs through this fund while providing advisory sessions to enhance their leadership and business management capabilities. This ensures that the loans yield a significant impact on their socially-focused enterprises.

What merits one for the funding?

For one to qualify for the loan, the borrower must have completed a minimum of six months in Somo’s acceleration programme and demonstrated compliance with all program requirements.

One must also have had a positive cash flow for at least the past three months. The entrepreneur must maintain accurate cash flow updates and submit timely quarterly reports before applying for the loan.

Before applying for a new loan, previous loans must have been repaid to a minimum of 85 per cent.

We also check the client’s financial stability by reviewing validated cash flow and bank statements to determine the ability to repay the proposed loan amount over the agreed term.

The minimum and maximum caps for businesses eligible for funding?

The loan limit varies based on the amount requested and the applicant's monthly profit.

First-time loan applicants can receive between Sh100,000 to Sh250,000, provided they generate a monthly profit of Sh17,000 to 35,000 which can both service the loan and also sustain the business operations.

After successful repayment of the first loan or at least 85 per cent pay, they are eligible for a larger amount of between Sh500,000 to Sh2.5 million depending on the business growth.

How do you compare to other lenders in the market?

We introduced the affordable loan funds for several key reasons. In Sub-Saharan Africa, there exists a significant capital investment gap, with fewer than 20 per cent of women able to access long-term financing from formal financial institutions.

Our distinctive approach to address this gap involves not only providing the lowest interest rates in the market but also offering comprehensive advisory support.

This support includes personalised guidance from assigned experts, as well as group mentorship sessions where women share experiences and receive expert assistance.

Our aim is to ensure that the affordable loan fund has a meaningful impact on both their businesses and lives.

How could stakeholders in the sector maximize public-private partnerships in support of businesses?

To support women-led businesses in the country, a collaborative effort between the government and the private sector is crucial.

Here are some concise suggestions: Access to Capital; they should establish dedicated funds or grants for women entrepreneurs, ensuring easy access to financing for startups and growth.

In terms of capacity building, they should provide targeted training, mentorship and networking opportunities to enhance entrepreneurial skills and knowledge.

To foster market access, stakeholders should ride on partnerships between women-led businesses and established corporations to expand market reach and distribution channels.

Policy reforms: Implement policies that promote gender equality, such as tax incentives, procurement quotas and regulations to address workplace discrimination. Technology adoption: Facilitate access to technology and digital tools, enabling women-led businesses to leverage innovation for efficiency and competitiveness.

Work-life balance: Support flexible work arrangements and affordable childcare options to enable women entrepreneurs to balance professional and personal responsibilities. Networking platforms: Create platforms for women-led businesses to connect, collaborate and share resources, fostering a supportive ecosystem.

By implementing these measures, the government and private sector can empower women-led businesses, driving economic growth and fostering a more inclusive entrepreneurial landscape.

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