Business formalisation driving more credit towards MSMEs - KBA

on average Sh1.1 billion has been disbursed to MSMEs annually under the program.

In Summary

•MSMES under KBA training program have accessed loans worth Sh.5.84 Billion since 2018.

•Over 7,000 MSMEs have accessed bank loans under KBA capacity building programme.

A display of tomatoes at Kangemi market/
A display of tomatoes at Kangemi market/
Image: FILE

Banks extended credit worth over Sh5.5 billion to an estimated 7,000 Micro-Small and Medium Enterprises across the country over the last five years.

This is on average Sh1.1 billion annually, as formalisation of businesses enhanced their capacity to access credit.

A new report by the banking industry umbrella body, Kenya Bankers Association (KBA) shows that despite the ability to access credit the growth is still slow.

The survey that polled MSMEs under the KBA's Inuka programme and some outside the initiative, shows that 84.2 per cent of the enterprises under the programme are predominantly micro-businesses. 

This compares to 85.2 per cent of non-Inuka enterprises are micro-businesses.

Just 1.9 per cent of Inuka and 3.5 per cent of non-Inuka enterprises are medium enterprises, while 12.5 per cent of Inuka and 11.9 per cent of non-Inuka enterprises are small enterprises.

Only a small proportion of these are large businesses comprising of 0.4 percent of Inuka and 0.3 per cent of non-Inuka enterprises

KBA CEO Habil Olaka said that since inception of the programme in 2018, it has managed to build capacity among small enterprises and enabled them to formalise and optimise operations and access bank credit.

“I am glad that 71 per cent of MSMEs that could previously not access bank finance have been supported to access credit under the programme. The businesses have had their credit applications after the programme approved either in full or in part, a testament that the programme has enhanced access to bank finance for viable businesses,”said Olaka.

According to the report, 82 per cent of beneficiaries of the programme have a KRA PIN ,while 48 per cent are formally registered with the Business Registration Services (BRS), with 60 per cent of the Inuka enterprises associating their registration with participation in the industry programme .

This compares to 70 per cent of non-Inuka enterprises that have a KRA Pin.

"Training aspect as an enabler of access to finance is essential. It is however not sufficient unless mapped with other constraints that are exogenous to the enterprises such as market access issues and firms’ competitiveness limiting, the report reads in part.

"Without these additional dimensions, the program’s promotion of access will not translate to enhanced usage of financial services."

The majority of enterprise owners are men, with 54.5 per cent of Inuka and 55.6 per cent of non-Inuka enterprise owners being male.

A significant portion of enterprise owners possess at least a secondary education.

Among Inuka enterprise owners, 32 per cent hold mid-level college degrees, while among non-Inuka owners, 34 percent have university degrees.

Roughly two-thirds of enterprise owners fall within the 26-45 age range.

Specifically, 61 per cent of Inuka and 66 per cent of non-Inuka enterprise owners are in this age bracket, while 14 per cent of Inuka and 10 per cent of non-Inuka owners are aged above 56 years.

Informal businesses in Kenya have experienced a notable increase over the past decade.

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