Banks generate a mere Ksh.2.1 billion loans from State guarantee

Some 1, 291 micro, small and medium enterprises (MSMEs) have benefited from the financing with the business distributed across 45 counties according to new Treasury data.

The highest dispatch from the fund was reached in December last year when 338 SME businesses received Ksh.478.3 million in partially guaranteed loans.

The government has covered 25 per cent of issued loans under the fund to the tune of Ksh.546.2 million or an equivalent Ksh.1 for every Ksh.4 in loans disbursed under the program.

The Credit Guarantee Scheme (CGS) was unveiled in December 2020 with the goal of lifting financing to SME businesses with the government partly offsetting the risks taken by commercial banks.

Even so, only about one fifth or Ksh.546.2 million of the CGS funds were absorbed from an original allocation of Ksh.3 billion to the fund.

The National Treasury did not immediately disclose the reasons for the Ksh.2.5 billion balance which is available to guarantee up to Ksh.9.8 billion in new credit.

The seven participating banks include Absa, Credit Bank, Diamond Trust Bank (DTB), KCB, NCBA, Stanbic Bank and the Co-operative bank.

Loans generated from the guarantee so far are still a drop in the ocean when contrasted with SME and private sector demands for credit.

Moreover, the rate of loan generation from the guarantee has been eclipsed by commercial banks' own organic loan book growth.

According to data from the Central Bank of Kenya (CBK), banking industry gross loans to December 2021 grew by 8.3 per cent or a respective Ksh.249.2 billion to Ksh.3.249 trillion.