It’s nothing new. Small business owners in Kenya have been grumbling with access to finance and the high cost of credit. And, after the Intrest rate caps in 2016, the problem became worse.
The Central Bank of Kenya says that about eighty percent of the MSME’s in the country go out business before they can celebrate their second birthday.
Many small-business owners have little collateral, patchy records, and non-existent credit histories. After 2016, banks became even more reluctant to lend to SME’s – they claimed that with interest rate caps involved, they were unable to calculate the risk and instead preferred safer options like established clients and the government.
Shylocks and unregulated digital lenders jumped on this opportunity, offering unsecured loans to help fund SMEs’ inventories, often with dire consequences in case of default or delay.
But the CBK has vowed to crack down on these unregulated lenders who continue to pop up everywhere.
Now, exactly nine months after a soft launch, “Stawi” a micro-lending facility announced that over one hundred thousand SMEs had signed up and it had lent out over Ksh 100 million.
KCB CEO and to extent, Stawi Chairman Mr. Joshua Oigara said that Stawi’s mandate was to democratize and to offer an affordable credit line for SMEs.
The Stawi project which is a brainchild of the CBK and a coalition of four banks; KCB, Cooperative Bank, NCBA and DTB will have a minimum lending amount of Ksh 30,000 and a Maximum of Ksh 250,000 repayable within 3 – 6 months at a rate 9 percent per annum.
Oigara said that Stawi will ride on big data and analytics to calculate the lending risk. Small business owners will only need to produce valid permits and KRA pin certificates to qualify for loans.
“Stawi is an enterprise product that won’t lend to personal money. It will be for small businesses that are starting or scaling and are growth-focused” He said.
Mr. Oigara was speaking during the official launch of Stawi on the 6th of November 2019 – a forum that was also attended by the Central Bank Governor Dr. Patrick Njoroge and President Uhuru Kenyatta.