President Uhuru Kenyatta has criticised bankers who profile small businesses as risky borrowers and then deny them loans.
The President described the bank executives as detached from reality, saying they were myopic in their pursuit to only reap profits from lending to the Government.
The bankers, he noted, should instead lend to micro, small and medium enterprises (SMEs) which he said were the ‘actual engines of the economy, including in creating employment’.
“You cannot just sit there in your ivory tower and think of minting money from investing in Treasury bonds. It is common sense,” he said.
Uhuru was addressing hundreds of small business owners and bankers who attended the launch of a mobile-based digital credit platform called Stawi in Nairobi yesterday.
His remarks were in reference to hesitance by some of the biggest commercial banks to provide cash for onward lending through Stawi.
Uhuru spoke a day after the law regulating interest rates was repealed, giving new hope that banks would finally start lending to small businesses.
KCB Group, Diamond Trust Bank, Cooperative Bank and NCBA Group are the bank pioneers backing the digital credit facility.
A handful of unnamed banks will reportedly join the group that has collectively pooled Sh10 billion for lending to small businesses.
While calling for bankers to buy into the project, President Kenyatta said the country’s estimated seven million small businesses were the engines of the economy.
Borrowers can access loans of between Sh30,000 and Sh250,000, repayable at a subsidised rate of nine per cent.
Discussions on the development of Stawi began about a year ago with a challenge to the banks to come up with ways to make credit more easily available and affordable to MSMEs.
Kenya Bankers Association chairman Joshua Oigara said Stawi was ready for the mass market after going through the pilot phase.
“We believe it will be a product for all the banks and we anticipate more than 40 banks will join by the end of November. If we bring in more banks, we will have created a new model to put the customer first,” said Mr Oigara, who is also the KCB Group chief executive.
The target in the pilot phase was to reach 20,000 businesses in four key markets of Gikomba, Kondele, Kongowea and Karatina. At least 80,000 users downloaded the app.
“Our plan is that in the future, five per cent of the lending in the industry can be coming through this kind of innovative product called Stawi. We are happy that we delivered it on time. Not many products are delivered this fast,” said Oigara.
The loans are designed to accommodate MSMEs, which have for a long time been unable to access affordable credit because of their high risk nature due to lack of collateral or business plans needed to convince lenders of their creditworthiness.
Only about two million MSMEs are formally registered in the form of a business license or tax details, and concern has been about the other five million businesses that are estimated to employ nearly 10 million Kenyans.
