Treasury urged to actualize the SMEs Fund

In the wake of the COVID-19 pandemic, micro, small and medium sized enterprises (MSMEs) are struggling to make a recovery.

According to James Mureu, the Chair of the Micro and Small Enterprises Authority(MSEA), they are the backbone of the country’s economy, and urgently need the immediate attention of lawmakers and policy frameworks.

He has urged the government to activate the SMEs Fund so as to support this sector.

´´Once in place the SMEs fund can enable the other donor support to channel funds through it, through which nobody can come and bring money into our government account.´´ Mureu said.

Mureu on SMEs Fund: The fund will be a major way of unlocking the full potential of the micro and small enterprise.#InsideGovernment ^CM @obrienkimani@JamesMureu @R_Owili @Aaoko_76 @KalekyeMargaret pic.twitter.com/ZTScPmMph4

— KBC Channel1 News (@KBCChannel1) January 28, 2022

Mureu explains that MSMEs employ more than 80% of the country’s workforce, and this more than warrants intentional intervention by both local and national government.

In 2020, a survey by the Kenya Private Sector Alliance revealed that MSMEs were the hardest hit by the effects of the COVID-19 pandemic, with 75% of them on the verge of collapse.

The State Department of Trade announced a Kshs 5 Billion stimulus package for MSMEs, but Mureu argues that this is not enough.

“The first people who should have been cushioned from this pandemic are the most vulnerable, and the most vulnerable are the SMEs…I know for fact that not much(stimulus packages) was allocated to this sector. Whether that is by accident or by design, I cannot tell.”

An idea for an MSMEs fund was floated by policy makers in 2017 but has not been actualised.

Banking institutions in Kenya don’t lend to MSMEs because they are not deemed credit worthy, and despite being financed by development partner grants to aid these businesses with loans, these loans are still being issued at market rate, with tough levies from 18% to 24%.

Mureu argues that these are some of the policy bottlenecks that are disadvantageous to MSMEs.

“MSMEs are not credit worthy in the eyes of financial institutions. The MSMEs fund will come in handy to support the players in that sector,” Mureu said.

Mureu: MSMEs are not credit worthy I the eyes of financial institutions. The SMEs fund will come in handy to support the players in the sector #InsideGovernment ^CM @StanleyWabomba @aoko @obrienkimani@MSEA_Kenya @k_wawira @KeTreasury @JamesMureu pic.twitter.com/FhPdYjcaDb

— KBC Channel1 News (@KBCChannel1) January 28, 2022

The MSEA Act was passed in 2012, and so far out of the approximately 7.5 million businesses that fall within the MSMEs category, 1.7 million have been registered. That leaves a massive gap of unregulated businesses that MSEA is yet to encompass.

Mureu explains that their focus is now on amalgamation of available data on Kenya’s MSMEs landscape in order to be better positioned to mobilize funding from development partners.