Early this year, KCB Bank Kenya announced that it was setting up a Sh. 800 million fund to finance revival of small businesses and cooperatives in Nakuru County.
The kitty set up in partnership with the Nakuru County government is targeting thousands of Small and Medium Enterprises (MSMEs) and cooperatives. Under this program, KCB will provide affordable loans to small businesses and cooperative societies whose businesses have been affected by the pandemic.
“We want to support the businesses as they push for recovery from the effects of the pandemic. We are deliberate in our effort to be the ‘partner kwa ground’ for support towards MSMEs across the country. We believe that the support given will go long way to benefit the livelihoods of our people and our economy as a whole,” KCB director of retail Annastacia Kimtai said.
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This marked the latest credit package the bank has tailored for micro, small and medium businesses in Kenya. Since March 2020 when the pandemic landed in Kenya, the bank has emerged as a leading source of support for struggling local businesses. The bank partnered with various counties such as Laikipia, Kiambu and Nakuru in lending to small businesses under interest subsidy and Credit Guarantee programs to cushion them from the economic effects of the pandemic.
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In February 2021 for example, the bank announced that small businesses would start to receive credit facilities of between Sh. 100,000 and Sh. 5 million. These loans are payable within 36 months. According to business and economic analyst Perpetual Atieno, these credit lines were a lifeline for a segment of businesses which heavily relies on credit for survival and cash flow. “Small businesses in Kenya are heavily reliant on credit. This was aggravated by the pandemic which triggered low sales, thin margins, reduced profitability, and overall losses,” she says.
For example, a research carried out by Nairobi–based Viffa Consult shows that small businesses in Kenya have been requiring up to Sh. 250,000 in capital support on average to get back in shape after the 2020 pandemic.
The accelerated credit offering by the bank has been boosted by a Sh. 16.5 billion kitty the bank got in October 2020 from the International Finance Corporation (IFC) for onward lending to small businesses. In the same vein, KCB chief executive officer Joshua Oigara says that the lender is now running an ambitious project on SMEs that will see it double lending to small businesses by between Sh. 50 billion and Sh. 60 billion this year.
To speed up the processing time for small business loan applications, KCB has also cut the time between application and approval from 14 days to seven days. According to Perpetual, embracing small businesses is not so far-fetched. “There is an element of risk to lending to small businesses. This has been keeping many lenders away from the MSME category. However, with the right targeting, MSME loans will not only uplift small businesses, but improve interest income,” she says.
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