Small and Medium-sized Enterprises (SMEs) play a significant role in a country’s economy, especially in emerging markets where they represent 90 percent of all businesses, 66 percent of all jobs created, and 50 percent of the world’s GDP.
However, various challenges have led to the stagnation or collapse of these enterprises. A survey by the Kenya National Bureau of Statistics (KNBS) indicates that approximately 400,000 MSMEs do not celebrate their second birthday.
Additionally, very few SMEs reach their fifth birthday, leading to concerns about sustainability in this critical sector. Data from the World Bank indicate that the annual SME credit gap in Sub-Saharan Africa is about US$330 billion.
This is because lenders often neglect SMEs due to different factors, including the high cost of customer acquisition and due diligence, insufficient data availability for accurate credit assessments, and lack of collateral.
Also, uncertain customer lifetime values and the high costs of distribution and servicing are among the barriers for SMEs to access credit.
The cooperative bank is one of the few lenders who have stepped up to address the challenge of lack of access to credit among SMEs.
Co-op bank has rolled out various products where SMEs can opt-in and access the amount of credit they need for their expansion. A good example is the Msamaria Women’s Loan which is tailored for women entrepreneurs.
Through the product, women entrepreneurs can borrow from as low as sh 5,000 and up to 10 million, with a repayment period of 24 months.
This gives the entrepreneurs enough time to plan, invest and generate income from their businesses. To qualify for the loan, one is required to have a business that is not less than a year old, as well as proof of a regular business cash flow.
In addition, one should have a business license of the current year where applicable and should Provide certified bank statements from other banks if their Co-op Bank account is less than 6 months old
The lender also has another product known as MSME Term Loan that targets all medium and small-sized enterprises.
According to the bank, the amount borrowed can be repaid in up to 60 months based on your level of business and the type of security provided.
The bank recently slashed interest rates charged on loans as part of providing affordable loans to its customers.
While the biggest beneficiaries of the new lower rates are corporates and institutions, Co-op Bank advised customers looking to take advantage of this low loan pricing rate for personal loans and asset financing to apply at any of their Branches countrywide.