Small businesses to access low-interest loans from World Bank-funded project

Small businesses can now access low-interest loans through the Supporting Access to Finance and Enterprise Recovery (SAFER) project.

SAFER, the brainchild of the government through the Kenya Development Corporation (KDC), the Ministry of Investment, Trade and Industry (MITI), and the National Treasury, is one of the four projects funded by the World Bank.

Other such projects that have benefitted from the Sh20 billion World Bank fund include the Kenya Industry and Entrepreneurship Project and Kenya Jobs and Economic Transformation.

The fund will be channelled to KDC for onward lending to participating financial institutions including licensed microfinance institutions (MFIs), the Central Bank of Kenya, licensed digital lenders and Saccos, who in turn will on-lend to MSMEs.

The financial support to the target clients ranges from Sh10 million to Sh500 million, with an interest rate of 8.5. It has a tenure of 60 to 120 months, inclusive of a moratorium of up to 12 months.

Dubbed Nawiri Wholesale Loan, KDC will disburse this facility to Sacco Societies Regulatory (Sasra)-regulated saccos, licensed MFIs and tier III commercial banks focused on lending to MSMEs.

While launching the SAFER project, Cabinet Secretary for Trade Rebecca Miano noted that higher chances of default by MSMEs hinder banks from financing them.

“MSMEs play a pivotal role in our economy, yet they face significant challenges in accessing funding from private financial institutions,” she said.

Cabinet Secretary for Co-operatives and MSMEs Simon Chelugui said that since Covid, MSMEs have been faced with the challenge of accessibility and affordability, hence the SAFER project.

Chelugui said that they are moving from collateral security when lending, to character credit score. “Total credit demand for the MSMEs sector is Sh4 trillion, while the market is only able to deliver Sh793 billion to the sector,” Chelugui said.

He pointed out that 21 million euros (Sh3.2 billion) have been signed to the SAFER project.

Under SAFER, individual microenterprises will access loans ranging from Sh7,000 to Sh150,000, while small enterprises can avail themselves of loans ranging from Sh150,001 to Sh250,000.

Microloans will have a tenor of up to 18 months, while small loans will extend for up to three years.