Businesses & Financial News

Jijenge Credit pin hopes on growth in 2021

Micro lender, Jijenge Credit Limited is pinning hopes on the recently read budget to intensify its lending activities to small businesses.

Jijenge’s Chief executive Peter Macharia said that the firm will seek to bridge the existing loan demand by SMEs, with the majority of businesses yet to recover from the effects of Coronavirus pandemic.

“The demand for loans is still there and the decision by the government to provide a sound credit market will not only boost the growth of the SMEs, but it will also result in the growth of the value chains, catalyzing a more vibrant economy,” said Macharia.

Adding that, these lee ways to SMEs, will not only help the sector survive but also ensure preservation of jobs.

“Not to mention that the survival of these firms is important as they are one of the major employers in the country’s economy. We have to keep supporting them where we can,” added Macharia who is also the founder of the micro lending institution.

Estimates show that Kenya’s Micro, Small and Medium Enterprises (MSMEs) contribute about 40 percent of the country’s GDP with the majority drawn from the informal sector.

Ranging from short-term liquidity and tax cuts to simple compliance for availing loans and extension of debt repayment periods since the pandemic hit, these enterprises, according to Mr. Macharia, will seek an array of relief from the government to tide over the economic crisis.

Micro lending is a financial innovation made possible by technology and the peer-to-peer economy. People looking to lend money to earn potentially high returns may fund borrowers with no unions and are locked from credit facilities, especially quick loans.

“MSMEs operate with limited financial resources and are less able to absorb heightened costs that result from shocks like COVID-19. Most entrepreneurs we interact with say that they have exhausted whatever little financial reserves and savings they had,” reveals Macharia – whose firm is considering expansion ventures in an effort to meet that demand.

A host of small businesses in Kenya are currently reeling from the aftermath of Covid-19 pandemic with as many enterprises continuing to face a significant decline in income. Evidence also shows that some entrepreneurs turned to credit and sold off assets to meet household needs which only provided temporary relief.

“Only a few entrepreneurs have the resilience to recover after the pandemic, and unless supported, many enterprises will eventually fail to survive the crisis,” he argues.

Jijenge Credit is a Kenyan-based non-deposit taking Microfinance lending Institution with over 10,000 clients with regional presence and mainly handles logbook financing for vehicles, asset financing, loans on title deeds and rental incomes, bid bonds, import duty financing, insurance premium financing, salary check-off loans among others.

Social and economic disruptions brought about by COVID-19 are projected to contract Kenya’s economy between 1 percent and 1.5 percent.

Figures by the World Bank indicate that since the pandemic struck in March last year, about two million or more people in the country have fallen below the poverty line and around one-third of household-run businesses have ceased operations.

Equally, figures by the Central Bank of Kenya warned that 75 percent of businesses risk closure due to the lack of emergency funds and crisis in liquidity.

Further, a study by BFA on COVID-19 indicates that more than 80 per cent of Kenyan respondents reported a decline in income while 67 percent reported an increase in expenses.

Along with the loss of livelihoods, remittances have fallen while few households have benefitted from direct cash assistance.

Indeed, the Treasury is planning to add Sh2 billion in fresh capital to guarantee commercial loans for small and medium enterprises (SMEs) in a bid to cushion them from the economic fallout arising from the coronavirus pandemic.

Treasury Cabinet Secretary Ukur Yatani said the government had decided to extend its capital in the scheme as it works towards the full Sh10 billion that was promised to promote loans to small businesses.

The government has already disbursed Sh3 billion this year and signed agreements with seven banks to offer the loans.

“To further promote access to affordable credit, the government has committed to progressively raise the capital. In this budget, I propose to allocate an additional Sh2 billion,” Mr Yatani said in his budget speech read on June 10.

Policy makers such as Mr Macharia reckon that banks will only provide loans to small businesses if they can get partial guarantees.

Under the scheme, the State will pay an undisclosed percentage of the losses in case an SME defaults on a commercial loan, a move that reduces the risk associated with lending to small businesses.

President Uhuru Kenyatta said the State is eyeing Sh100 billion for the scheme with more funds to be raised from international financiers.

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