Credit firms seek to rescue SMEs hit by social unrest

By Remie OTIENO

Businesses struggling to stay afloat and those hurting from the prevailing anti-finance bill 2024 protests, can now access pay-as-you-grow credit schemes from selected credit companies, giving them flexibility including repayment breaks or extended loan terms.

Lending institutions such as Jijenge Credit limited have this week announced measures to cushion borrowers and SMEs from the hard economic conditions, precipitated by the above factors besides rising interest rates and inflation.

“This has been motivated by the scenes we have witnessed this week where businesses have suffered in the hands of some protesters, and so these debt measurers which varies from case-to-case basis, will go along way to bail out struggling businesses and households,” said Peter Macharia, the Chief executive of Jijenge Credit in an interview, on the sidelines of the ongoing national social unrest.

However, this is not a formal scheme but a ‘rescue package’ to both its existing and new customers and any loan extension is purely at the discretion of the lender, said Macharia.

Tuesday and Thursday protests have left several nascent businesses to navigate challenging financial crosscurrents — and a possible slump — at a moment when they are at their most fragile.

“Young businesses or commonly called SMEs are inherently vulnerable now,” said Macharia, also a banker. “They’re likely to fail, and they are especially likely to fail now and that is why as Jijenge Credit we want to step in, to help them prop up their operations during these threatening times.”

Data on actual business formation will not become available for several weeks, perhaps months, so it is not possible yet to measure the effects of these protests and vandalism to the economy on new and existing ventures. Whether these new businesses pull through could have broad implications for the health and dynamism of the overall economy, noted Macharia whose firm specialises on logbook loans, Title Deed Loans, Trade Finance, SME/Business Loans, among others.

In interviews, entrepreneurs expressed a mix of resolve and resignation about the months ahead. Some said they had learned lessons from the previous upheaval about how to endure financial adversity that they believed had recession-proofed their business models. “

“We will recover, we have been here before,” said Moses Opallo – an entrepreneur who runs an auto garage and spares in Nairobi, whose business is yet to recover from the aftermath of the protests.

Deadly Kenyan protests that scuppered tax hikes are violent reminders of the dangers posed by faltering economies and punishing austerity measures.

President William Ruto, who reversed support for a tax-hike measure, now must find another path to make the country’s debt pile of some $80 billion more manageable.

Senior IMF official was quoted this week saying the lender will not back down on the conditions it has imposed on Kenya.

The international Monetary Fund (IMF) a World Bank – backed lender and the Kenyan authorities reached a staff-level agreement on a set of comprehensive policies and reforms needed to complete the seventh reviews of Kenya’s Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements and the second review under the Resilience and Sustainability Facility (RSF) arrangement.

Key policy actions entail corrective measures to safeguard debt sustainability, including measures underpinning the FY2024/25 budget to reverse the impact from the fiscal slippage in FY2023/24.

The medium-term outlook remains favorable predicated on advancing reforms to boost exports and fiscal revenues, rebuild buffers, and strengthen the economy’s ability to withstand external shocks.

Kenya, like others, borrowed heavily in the mid-2000s, when interest rates were low and China was splashing cash via its Belt and Road initiative to lend to emerging markets worldwide.

News outlets reported this week that, over the past 20 years Kenya amassed some $82 billion of debt to build roads, railways and factories. But not all ambitious projects were completed and many Kenyans felt they had not benefited, opening a new tab, while a slew of corruption scandals spurred allegations that elites enriched themselves.