MSMEs access to loans limited by data gaps — bankers

Kenya Bankers Association boss Habil Olaka says lack of credit hampers growth

In Summary
  • The MSMEs survey notes that access to MSME capital remains limited as only 22 per cent of the enterprises reported having applied for start-up loans.
  • The survey comes amid efforts to support MSMEs in light of the Covid-19 pandemic.
The new look Kenyan currency notes.
The new look Kenyan currency notes.

Banks have scanty data on small businesses, hence are limited in the extent to which they can extend loans to the enterprises, Kenya Bankers Association boss Habil Olaka has said.

The KBA chief executive officer said the limited access to credit impedes the growth of MSMEs.

Olaka spoke during the launch of the 2021 MSMEs Survey Report, conducted by the KBA Centre for Research on Financial Markets and Policy and the Japan International Cooperation Agency.

The survey found that only 22 per cent of MSMEs reviewed applied for to start-up capital loans, out of which only 9 per cent was from banks. They mostly got capital from savings (64 per cent) and non-loan support from family and friends (12 per cent).

While 83 per cent of the MSMEs reported having had their loan applications approved within three months, 49 per cent said their borrowing from the different credit providers required collateral, the survey highlighted.

“This report is critical in bridging the existing information gaps between financial service providers and MSMEs,” Olaka said. 

Yatabe Masafumi, JICA survey team leader, said that reducing lending costs can enhance access to credit for MSMEs

The survey comes amid efforts to support MSMEs in light of the Covid-19 pandemic.

“At a time when economies worldwide and more so our domestic economy continue to be characterised by fragility and substantial slack due to the Covid-19 pandemic and its containment measures, any conversation on economic recovery in a sustainable way must be centred on strengthening the MSMEs sector,” Olaka said.

The survey found that ICT and agriculture are the leading host sectors for MSMEs in Kenya

The report also ranks manufacturing and construction among the dominant hubs for the enterprises that collectively create an estimated 15 million employment opportunities in the economy.

Demand drivers for bank loans among MSMEs include suitability, awareness of loan opportunities, loan amount sought, cost of credit, product features, room for negotiation, availability of credit guarantee services and collateral requirements, the survey highlights.

“The importance of MSMEs to the Kenyan economy cannot be overemphasized. With over 7.4 million MSMEs, employing over 15 million people, these enterprises contribute about 30 per cent to the national value-added tax,” Olaka said.

JICA-Kenya chief programmes officer Anne Olubendi called for more support for MSMEs.

“MSMEs are more generally seen as accelerating the achievement of wider socio-economic objectives, including poverty alleviation. Their ability to grow highly depends on their potential to restructure and innovate. All these investments need capital and hence access to finance,” she said.


(edited by o. owino)