Kenya’s Economic advisory arm is pushing the country to develop a national guarantee fund to help plug a huge financing gap to business start ups.
The fund will also have supporting units across its 47 counties to spread capital to more sectors of the economy, and lower risks associated with micro-small and medium enterprises.
Operational guarantee funds in Kenya, The advisory arm, National Economic and Social Council(NESC) valued at a paltry Sh 7 billion against a need of Sh 37 billion.
In a book it launched today, NESC said the operational funds are highly concentrated in Agricultural sector and for supporting MSEs leaving other valuable sectors with limited access to credit.
“The recommended Framework should therefore enable beneficiaries who often lack bankable collateral to receive bank credits at competitive rates,” according to the council.
It proposes more such facilities to cover all sectors to offer traders competitive rates.
Kenya has only three state administered funds not rated under Credit guarantee schemes(CGSs) attracting lower interest rates-a factor that pushes away interest of commercial banks from playing their intermediary role.
The three supported by the exchequer include, Youth Enterprise development Fund(YEDF), Women Enterprise fund(WEF) and MSE funds.
The informal sector contributed to more than 80 percent of 740,000 new jobs created by the economy last year, according to the 2013 National Economic Survey.