Small and medium-sized enterprises (SMEs) will be able to acquire up to 40% of government contracts under a new credit guarantee scheme, the country’s Deputy President, William Ruto, has affirmed.
Ruto was speaking at a meeting with the Kenya Federation of Master Builders in Karen, in Kenya’s capital city of Nairobi.
He explained that under the Credit Guarantee Scheme, all SMEs will access affordable credit enabling them to seize business opportunities and acquire 40% of government contracts, reserved for the sector.
According to a global lobby group, Transparency International, an estimated 60% of the government’s expenditure is used for the procurement of goods, works, and services. Public procurement accounts for 11% of Kenya’s Gross Domestic Product.
Kenya’s SMEs often have a difficult time acquiring such contracts. However, the Deputy President has assured the public that this is about to change.
“We have instituted mechanisms to boost SMEs by creating a conducive climate to operate, thrive, spur development; create wealth and jobs,” Deputy President Ruto elaborated in a statement issued on April 15th, 2019.
In early April 2019, Kenya’s President Uhuru Kenyatta announced that his administration was set to launch the Scheme will be launched in a few weeks’ time.
In his State of the Nation address, Kenya said the initiative will deepen access to credit, without being subjected to complex application procedures and collateral requirements.
The scheme, which will make the state guarantee commercial loans issued to SMEs, is seen as an initiative to counter the depressed credit to SMEs that have been on a downward trend over the last five and exacerbated by capping of interest rates.
“These interventions are critical to the production of competitive goods and services for the domestic, regional and global markets,” President Kenyatta said at the time.
According to the World Bank, Credit Guarantee Scheme help de-risk SME lending by providing partial guarantees in the case of default.
Kenya plans to learn from the successful implementation of such schemes from Malaysia, the United States, and South Korea.