The Kenya Private Sector Alliance (KEPSA) has proposed the immediate set up of Biashara Bank which will benefit SMEs by increasing access to affordable credit and capacity building.
Ms Carole Kariuki, chief executive KEPSA made this proposal at the eighth Presidential Roundtable held to discuss private sector participation towards the achievement of the Big Four agenda.
According to Ms Kariuki, affordable credit is essential for businesses such as SMEs to participate in the Big Four agenda.
To attain affordable credit, KEPSA notes that certain actions are already in play such as the review of the rate capping law which will be included in the next Finance Bill and the establishment of Exim-Bank which has been included in the National Export Strategy whose implementation will start on 1 July 2018.
Exim-Bank will be a source of trade finance that will ensure the growth of SMEs in foreign trade.
Interest Rate Cap Law
Introduced through the Banking (Amendment) Act 2016, the interest rate cap law has failed to ease credit access by SMEs and households. In fact, the law has instead made it easier for large businesses to acquire credit.
So far, the banking sector and President Uhuru have expressed the need to review the law because it has not achieved its intended purpose.
Currently, private sector credit growth has slowed down according to the Kenya Bankers Association (KBA) hence the need to make credit accessible to SMEs. SMEs are important to the country’s economy because of their significant contribution.
Habil Olaka, KBA’s chief executive said: “Typically, the market can rebound within three months of a shock, but in this case, the rate caps have prolonged if not exacerbated the declining trend of credit growth”.
By implementing KEPSA’s proposals, SMEs will be better placed to participate in the Big Four agenda thereby increasing their contribution towards economic growth.