NAIROBI, KENYA APR 30 — Invest in Africa (IIA) has called for increased and continuous support for Small and Medium-sized Enterprises in the wake of a financing gap among the small businesses in Kenya.
This comes as SMEs continue to feel the impact of the interest rate capping which has seen banks shift their main focus to government securities, with little being extended to the private sector.
IIA- Kenya Country Manager, Wangechi Muriuki said SMEs remain key in the growth of the country’s economy hence the need to support their growth.
“Small and Medium Enterprises are the key drivers of growth in the Kenyan economy, creating about 90 per cent of new jobs every year and contributing to about 25 per cent of the country’s Gross Domestic Product,” she noted.
She was speaking in Nairobi during a Breakfast Panel where IIA (Kenya) hosted over 50 SMEs to a discussion themed: “The SME financing gap – myth or reality?”, at the Strathmore Business School.
The purpose of the forum was to foster the participation of and dialogue between SMEs and financiers on perceptions biases regarding SME financing, if any, and gain consensus on the way forward towards advancing the SME financing agenda in Kenya.
According to the not-for-profit organisation, perceptions about SME financing have metamorphosed over different sectors, influencing the behaviour of both SMEs and financiers.
On one hand, financiers are perceived to have stringent lending conditions while on the other hand, SMEs are perceived to be a risky lot.
The growing attention and interest regarding SME development in Kenya has led to a more diversified pool of targeted funding options for SMEs ranging from debt to equity financing.
More Development Finance Institutions are extending credit lines to commercial banks for lending to the SMEs while there is remarkable growth registered in Equity funding in the form of venture capitalists, angel investors, private equity funds, grants among other initiatives.
“Despite the growing number of targeted efforts for financing SMEs, the lack of access to finance continually emerges as a critical factor affecting the growth and scaling up of SMEs in Kenya. It remains one of the most debated topics on matters SME,”Muriuki said.
Equity Bank’s director of SME banking Philip Sigwart highlighted that banks are generally considered to be averse to risk. He however noted the importance of protecting depositors’ money as this is what is used to on-lend to those seeking credit facilities.
He said Equity Bank disburses between Ksh4billion and Ksh5 billion monthly to SMEs.
Jeff Alondo, head, enterprise banking, Stanbic Bank noted that 90 per cent of SMEs in Kenya have access to finance from various sources.
However, a considerable number do not keep records nor have business plans while many of them do take a long term sustainability view of their businesses.
“Every SME should aim to build a company that will outlive them,” Alondo noted.
Martin Kiilu, lead at Intellecap Impact Investment Network emphasized on the importance of developing a business vision.
“Investors are not just looking for businesses to invest in but visions to invest in”, he said.
From an SME perspective, Myke Rabar, the CEO and Founder, Homeboyz Entertainment advised SMEs on the importance of being trustworthy to enable growth and business partnerships.
Hadija Jama, director, Darubini Screening Company Limited highlighted the importance of background checks and various screening interventions that SMEs can employ in their business to improve on their credit score and competence.
Professor Geoffrey Injeni, Faculty and Consultant at Strathmore Business School affirmed that the institution has training programmes that assist SMEs to become investor ready and are working with customers of some financial institutions.
Their focus is based on research led studies and business cases. This provides a more practical approach for SMEs to improve their businesses.
Invest In Africa is working to enhance SME access to skills, markets and finance in partnership with both leading organizations in Kenya in order to drive job creation and enterprise development in the economy.
Together with its Partners, IIA has built a unique, world-class online technology platform – The African Partner Pool (APP) that currently has a cross-sector database of over of over 1,300 vetted SMEs from Kenya.
The platform directly connects SMEs with larger organizations sourcing for goods and services locally and also offers capacity building to enable address existing skill and knowledge gaps.
IIA partners with Tullow Oil, Equity Bank, EY, Clyde & Co, Ecobank, Safaricom, Shell, Nation Media Group, AMSCO, Strathmore Business School, Keninvest, Kepsa among others.