The Senate Ad Hoc Committee on coronavirus pandemic has proposed a liquidity support package for Micro, Small and Medium-sized Enterprises (MSMEs), but only for those that are tax-compliant.
Furthermore, the Senate committee is pushing for the publication of the regulations establishing the Micro and Small Enterprises Development Fund by the Industrialization, Trade, and Enterprise development Ministry, so as to allow its operationalization.
According to the committee, MSMEs in trade, agriculture, tourism, and retail are the worst hit by the COVID-19 pandemic.
Back in April, President Uhuru Kenyatta promised an SME credit guarantee scheme to exempt them from complex application procedures and collateral requirements during application for loans. The scheme is meant to assist small businesses to cope with the economic and financial disruptions caused by the pandemic.
The other economic stimulus intervention announced by President Uhuru Kenyatta is tax relief to mitigate the effects of COVID-19. Parliament approved:
- Removal of income tax for all persons earning a gross monthly income of less than KSh24,000
- Reduction of the Turnover tax rate from 3% to 1%
- Reduction of PAYE (Pay-As-You-Earn) tax from 30% to 25%
- Reduction of VAT from 16% to 14%
- Reduction of resident corporate income tax from 30% to 25%
The International Monetary Fund (IMF) has projected that Kenya’s economy will grow at a rate of 0.8 % in 2020 against the National Treasury’s estimate of 3%. This is five percentage points below the pre-COVID-19 baseline. The World Bank says Kenya’s GDP growth could hit below 0.2%.