Standard Chartered CEO Kariuki Ngari believes that MSMEs must strive to raise their creditworthiness to ensure that they are in a good position to receive lending.
Speaking during last week’s My Chat with a Bank CEO, Mr. Kariuki was discussing the strategies of Enhancing Enterprise Credit Worthiness.
Furthermore, the chat focused on the role of banks in supporting the growth and development of MSMEs. Mr. Kariuki says that MSMEs are at the heart of the Kenyan economy as they support 13 million jobs.
Determining MSMEs Credit Worthiness
When determining the creditworthiness of a business banks consider several factors.
- Banks ensure that the business actually exists and that it is operating legally by the nature of the business and its viability. It is very important to make sure that any money banks lend (which ultimately belongs to depositors) should be repaid
- The ability to repay the debt so the bank will look at business cash flows to ensure the business can actually pay the debt. In cases where security might be required, depending on the amount, then an acceptable collateral to secure the debt will also be taken into account
- Once the banks factor all these aspects and are happy about the viability of the business, then the banks will engage with the borrower.
Steps an entrepreneur can take to enhance the creditworthiness of their enterprise
Mr. Kariuki elaborated on the steps an entrepreneur can take to enhance the creditworthiness of their business.
First, SMEs must adhere to good record keeping, “it is very important to have good records of your sales, your costs, or in business speak, proper management of your accounts…ensure returns as required by regulatory authorities, such as tax returns, are up to date,” he said.
Moreover, MSMEs should ensure they have the right management in place.
Good management ensures that there is a viable business that lasts and can meet its obligation; the nature of our MSMEs in Kenya is typically a one person business, and this person has to be there all the time which is not always possible and therefore puts the business at risk. So it is important to invest in good staff.
Kariuki Ngari – CEO Standard Chartered Bank
Entrepreneurs should invest in training themselves on how to manage the business. Today quite a number of banks have programs that equip customers with business and management skills.
The high demand for loans from digital lenders shows there’s an unmet need in the financial sector. Banks are increasingly rolling out programs focused on lending to MSMEs. Kariuki Ngari highlighted various interventions by Kenya Bankers Association and banks that promote lending to MSMEs such as Inuka Enterprise program and Stawi Program.
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