Manufacturers move to arrest late payment culture

KAM Chief Executive Phyllis Wakiaga

An initiative by local manufacturers could resolve issue of pending bills that has proved to be a thorn in the flesh to businesses in the country.

By June 2020, the Auditor General report indicated that the government held on to Sh137 billion in pending bills including Sh42 billion in historical debts. County governments similarly owed Sh100 billion to various entities in both the private and public sectors.

The private sector has tried over the years through the Kenya Association of Manufacturers and the Kenya Private Sector Association to lobby the State to clear pending bills, a big portion of which are owed to Small and Micro Enterprises struggling to stay afloat.

Manufacturers have signed a Memorandum of Understanding (MoU) towards the establishment of an Industry Credit Group, that will seek to curb the late payment culture which is the biggest impediment to liquidity for businesses.

Kenya Association of Manufacturers (KAM), Veri-Credit, and Association of Kenya Suppliers (AKS) partnered to promote the proactive mitigation of credit risk management by businesses.
 
The KAM Industry Credit Group, managed by Veri-Credit, seeks to promote best credit practices between businesses and their suppliers under trade associations. It will also seek to significantly improve businesses’ cash flow and drive a change in overall payment culture in Kenya.

KAM Chair, Mr. Mucai Kunyiha noted that the partnership has come at a critical time when businesses are facing cash flow and liquidity challenges due to late or non-payment of bills by both the government and the private sector.

“Many businesses experience a lot of administrative and financial burdens due to late and non-payment. Prompt payment is therefore critical to the performance and operations of any business, more so the small and medium-sized enterprises (SMEs). Bad debts and poor debt collection methods contribute to the challenges facing small businesses. When small businesses do not get their payments on time it means that they are also not able to pay their suppliers. Late payments to SMEs stifles innovation and growth of the manufacturing sector,” said Mr. Kunyiha.
 
Veri-Credit Director, Mr. Stephen Mills noted that the partnership is a step in the right direction for manufacturers, suppliers, and Kenyans.  

“This is a creative, and practical payment solution of immense value to manufacturers and suppliers. It shall have a positive impact on the economy, by protecting jobs through enabling cash flow and liquidity for businesses across the country,” remarked Mr. Mills.  

AKS CEO, Mr. Ishmail Bett noted that perennial prompt payment challenges have impacted suppliers and expressed optimism that the partnership shall resolve them.

Globally, Trade Association Industry Credit Groups are membership-based and work by permitting credit professionals (in different association member companies) serving the same customer, to compare payment practices. They compare negative information on the collective history and exchange data on payment practices.