How this financier is bridging credit gap for SME growth in Kenya

By Monica Muema

Kenya’s Micro, Small and Medium Enterprises (MSMEs) companies are essentially the backbone of Kenya’s economy, accounting for 98 per cent of the country’s businesses and contributing about 40 per cent of the country’s GDP, according to estimates by the National Economic Survey of 2017.

Despite their crucial role in driving the country’s economic development, evidence suggests that SMEs in Kenya experience a severe shortfall in financing, which has historically hindered their growth.

Economists attribute that financing struggle to unpredicted micro economics that has led to a tough credit market, uncertainty brought by Covid-19 and now the looming general elections.

It is against this backdrop that the Chief executive officer (Ceo) of micro lending institution Jijenge Credit Limited, Peter Macharia now says that ‘a solution is urgently needed’ if the local SMEs are to be rescued from the funding crisis.

“You cannot ignore their contribution to this economy, yet they still struggle to access financing. It is a crisis which needs an urgent solution,” quips Mr. Macharia in an interview.

With the company’s customer portfolio comprising 80 percent of micro, small and medium enterprises while the remaining 20 percent being employees of various companies, Jijenge Credit founder says part of his ambitions as the economy near full opening, will be to expand its lending volume in a bid to capture the ‘vulnerable lot’.

“When Covid-19 hit, it came with a lot of learning lessons and while we offered an extended moratorium or tax holidays to our clients, we still feel there is a need to support this group back on their feet as part of our expansion plans into post-Covid 19 era,” he said.

With public service vehicles (PSV) now back to carrying full capacity – Macharia who founded the company eight years ago, says the move by the State, albeit a gamble in the eyes of medical observers, will boost certain business operations that were operating with thin margins.

“We are seeing a growing interest from SMEs in the transport sector knocking on our doors for additional funding to expand their operations. It is a good sign and hopefully this will fuel our desire to rethink our expansion plans across the country,” admits the former banker.

Jijenge Credit avoided the temptation to open its second physical branch office in Nairobi’s CBD to meet the growing demand for its customers owing to the Coronavirus scare and effects it brought.

“Those plans are now back on our lips and preparations to unveil it will soon be hatched,” he revealed.

It is estimated that there are about 7.41 million MSMEs in Kenya, and only 1.56 million are licensed while 5.85 million are unlicensed – meaning the demand for loans among the subsector is inestimable, according to Macharia.

Jijenge is one of the country’s leading micro lenders in the disbursements of quick logbook loans, salary check-off bid bonds and salary check-off loans.

The firm offers car loans to vehicle owners with valid logbooks at relatively low interest rates with repayment period of up to 12 months, double the time offered by other micro-financiers in Kenya whose period can be stretched by up to 24 months.

Most of its logbook loans customers are people looking for emergency loans to sort out situations that require quick credit.

Such challenges have been compounded by the pandemic since the firm case was reported in March last year, throwing many businesses in jeopardy with many companies forced to trim their work force while others closed shop altogether.

As a result, the need for financial emergencies has remained constant among Kenyans – both employed and those in the self-employment category since the pandemic hit.

Further, the introduction of the digital interface check-off system by the firm in September 2020, Mr Macharia says, will also play a key role in its lending ability.

The move had been informed by a steady rise in demand for loans witnessed since the easing of movement restrictions in July, as more individuals and businesses took up loans to manage their operations.

The company last year disbursed over Sh200 million for pandemic-related loans and moratoriums – which showed the demand for loans among Kenyans who are still reeling from the adverse impact of the third wave and new variant (DELTA) virus as well as a distraught economy.

Kenya’s private sector activity, for instance, fell to a three-month low in July as businesses registered a slower pace of output growth and sales due to the recently enacted tax changes, according to PMI survey data by Stanbic bank released last week.

The country’s high taxation regime which kicked off in January 2021 has had a knock-on effect on the production costs for most businesses now reeling from its impact – and marking the toughest third quarter for employers.

Of the worst affected industries manufacturing and wholesale and retail companies took a huge decline, compared to Agriculture, construction and services firms which registered growth of new business during the month under review.