In a strategic move to support small businesses, the Kenyan Treasury has introduced the Kenya Credit Guarantee Scheme Company (KCGSC) in collaboration with financial institutions. The initiative, developed in partnership with commercial banks, aims to de-risk lending to small businesses, particularly those emerging from the Hustler Fund.
The Kenya Credit Guarantee Scheme Company (KCGSC) represents a collaborative effort between the government and the private sector. The primary objective is to guarantee a portion of loans issued by commercial banks to Micro, Small, and Medium Enterprises (MSMEs), facilitating access to higher-value loans for businesses that exceed the capacity of the Hustler Fund.
Albert Mwenda, the Director-general for Budget, Fiscal, and Economic Affairs at the Treasury, emphasized that the formation of KCGSC will adhere to international best practices. The scheme is designed to tap into private sector liquidity to finance MSMEs while promoting financial discipline.
The KCGSC seeks to support MSMEs transitioning from the Hustler Fund to the formal financial sector, enabling them to access larger credit volumes at reduced government costs. Presently, the Treasury guarantees up to 25% of loans under the existing scheme. The new KCGSC, however, aims to cover a larger share of the loan, addressing the challenges of limited uptake and aligning with the Treasury’s objective of unlocking more significant funds for small traders.
The Treasury’s report underscores the importance of clear business classifications and a revised risk assessment approach by banks to enhance credit accessibility for MSMEs. This initiative is considered crucial for Kenya’s economic development, aligning with broader efforts to promote financial inclusion, especially for MSMEs at the lower end of the economic spectrum.
By Delino Gayweh
Serrari Financial Analyst
January 23, 2024
