Five Banks, CBK partner to launch loan facility for SMEs

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Small and Medium Enterprises (SMEs) will have more avenues to access credit after five banks on Monday partnered with the Central Bank of Kenya to launch a loan facility targeting small businesses.

The five banks: Commercial Bank of Africa, Cooperative Bank of Kenya, Diamond Trust Bank, KCB Bank and NIC Group, will manage the facility, dubbed Stawi, which will allow SMEs to borrow loans between Ksh. 30,000 and Ksh. 250,000.

According to a news report by the Business Daily, the loans will have a repayment period of between one and 12 months at a set interest rate of nine per cent per annum. The loans will also only be processed via mobile phones while amounts to be borrowed will be determined by the borrower’s profile.

“Small and mid-size enterprises are the lifeblood of any economy, but many have struggled to secure the necessary financing to continue operations in the current economic climate. We are excited to work with the five banks to minimise the complexity of developing new and more accessible loan offerings as they bring much-needed capital to this underserved yet vital segment of the market,” CBK governor Patrick Njoroge is quoted as saying by Business Daily during the launch of the product at Nairobi’s Gikomba Market.

Ever since the government introduced the interest rate cap law to protect consumers from overcharging traditional lenders, banks have shied away from issuing loans to SMEs who are conventionally viewed as risky borrowers because of their high probability to default on loans. The banks’ unwillingness to offer SMEs with loans has led to a cash crunch that has greatly affected the enterprises and the Stawi initiative has been pegged as one of the CBK’s latest efforts to unlock the credit squeeze.

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