CREDIT MARKET

Digital lending to spur MSME growth in 2020

It is predicted digital lending will be a game changer for small traders owing to positive regulatory environment and progressive government initiatives.

In Summary

•Jijenge Credit Limited CEO Peter Macharia notes a huge chunk of the market with opportunity for digital lending is still untapped and could attract more players.

•Tough conditions set by commercial banks has seen small businesses turn to informal credit channels.

Jijenge Credit Limited CEO Peter Macharia
Jijenge Credit Limited CEO Peter Macharia
Image: /COURTESY

Small and medium enterprises (SMEs) are relying heavily on mobile loans for funding more than ever as banks continue to shun credit issuance to small business owners, industry trends show. 

This despite the lifting of interest rate caps last year that was intended to free up credit flow to the sector.

It is now predicted that digital lending will be a big changer this year for small traders owing to positive regulatory environment and progressive government initiatives.

This comes on the back of tough conditions set by commercial banks which has seen small businesses turn to informal credit channels which though less bureaucratic but are more expensive – have continued to provide a respite to majority of SMEs.

I expect to see the momentum carry on this year because of several factors especially regulatory reforms and the fact that more Kenyans have embraced this form digital payments because of fast payments,” says Peter Macharia, CEO Jijenge Credit Limited, a local digital lender.

Over the last few years, the advent of Kenyan fintech with regards to digital lending, has been a game changer for the MSMEs.

However, Macharia says a huge chunk of the market with opportunity for digital lending is still left untapped and could attract more players with both local and foreign presence.

On Wednesday last week, five state agencies partnered to spur growth to small businessess through funding and technical support, signaling the important role SMEs play in the country’s economy.

Small businesses, especially in the informal sector have been a key contributor to Kenya’s economy accounting for close to 30 per cent of the country’s GDP.  

According to Kenya National Bureau of Statistics (KEBS), SMEs also represented the high growth in employment creation having garnered about 83.6 per cent of the 846,000 jobs created across major sectors in 2018.

IDB Capital, Industrial, Commercial Development Corporation, the Kenya Industrial Estate, the Micro, Small Enterprises Authority and the Kenya National Trading Corporation will drive President Uhuru Kenyatta’s SME agenda.

THis was mooted on Jamhuri Day last year with plans to start Stawisha SME Mashinani, coupled with unspecified administrative measures to deal with the challenges facing the sector.

The state bodies will share information in order to contribute to growth of MSMEs at the grassroots level.