93% of SMEs miss out on govt backed loan restructures

93 per cent of small and medium enterprises (SMEs) or about nine out of every 10 businesses have reported missing out on loan restructures offered by financial institutions.

This is according to a new survey by SME consultancy Viffa Consult which reveals the bulk of enterprises in the country are yet to mark any gains from the restructures backed by the Central Bank of Kenya (CBK).

Similarly, nine out of 10 businesses says they are yet to mark success in accessing loans from any financial institution so far in 2020.

This also being against CBK’s move to lower the cash reserve ratio (CRR) requirement by banks to 4.25 per cent in March freeing up Ksh.35.2 billion in new funding to the medium enterprises.

According to data from the CBK as of the end of October, local commercial banks restructured loans worth Ksh.1.38 trillion to include Ksh.303.1 billion in personal loans.

Findings from the survey conducted between October 27 and November 27 however indicates the restructures which feature standstill facilities on outstanding debt and longer repayment period skipped the essential businesses.

Similarly, the CBK reported banks had accessed 92.7 per cent of funds from the lowered CRR ratio or a respective Ksh.32.6 billion without the new funding flowing to SMEs as desired.

The side-lining of SMEs from both financing access from banks and loan restructures is largely attributable to the general bias against micro enterprises by local financial institutions.

For instance, traditional banks only covered for three percent of SME funding this year while mobile money platforms led as the top source of funding for the enterprises.

Coincidentally, banks contribute to the highest share of mobile-money sources for the businesses as revealed in a different survey by Viffa earlier this year.

In spite their reference as the backbone of the Kenyan economy, SMEs have seemingly remained in the cold when it comes to financing access.

The emergence of the COVID-19 pandemic has meanwhile tightened complications for the businesses as commercial banks view them as more risky entities hence pushing back against loan issuance to SMEs.

Other measures to cushion the enterprises such as the creation of a State backed credit guarantee scheme are yet to bare fruit.