Small-scale traders can now access cheap loans following the creation of a fund from which they can borrow.
Governor Anyang’ Nyong’o has assented to a Bill – the Kisumu County Enterprise Bill – which has given legal backing to the formation of the kitty.
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According to Nyong’o, the fund will grant unsecured loans to small-scale traders who have hitherto been locked out of mainstream financing by major banks, due to tough collateral demands.
The loans will be repaid with an annual interest rate of eight per cent.
Nyong’o explained that the county administration aims to use the fund to turn small-scale traders, hawkers and mama mbogas into medium-scale entrepreneurs.
“This fund is based on a similar idea as the one mooted by the Lake Region Economic Bloc (LREB) while planning to from a regional development bank,” said Nyong’o in a statement.
“Most of these small businesses have remained crippled because they cannot raise the collateral demanded by the big banks.”
The kitty will get money from annual allocations from the county budget, as well as a levy that will be created to fund it.
According to Nyong’o, the county administration will form a committee which will vet the businesses that will qualify for the loans.
The governor also explained that the new International Financial Reporting standards, which have set tough accounting rules on how banks handle their non-performing loans, have again led to small traders being locked out of business financing.
As a result, although banks are supposed to set aside up to Sh40 billion for lending to small traders annually, the rules have made it impossible for them to do so.
The Bill is one of three others that Nyong’o has lately assented to.
The others are the Village Councils Bill and the Road Maintenance Team Bill.
Nyong’o also expressed hope that the fund will spur job creation in the county.
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