Issue Number 41 • October 2013
Issue Number 41 • October 2013
Credit finance a critical bottleneck
Lack of collateral undermines implementation of procurement quotas …By Faith Muiruri
ven as the Government rolls out procurement quotas valued at KSh200 billion for women, youth and persons living with disabilities, lack of credit finance is emerging as a critical bottleneck that may upset the noble opportunity. And although President Uhuru Kenyatta has urged financial institutions to extend credit to the youth, women and persons with disability to enable them finance their tenders, majority lack collateral that will help them go for loans. According to Ann Waiguru, Cabinet Secretary for Devolution, already tenders below KSh500,000, have been ring-fenced for enterprises owned by women, youth and persons with disability.
Statistics Waiguru notes that the Ministry is currently working with the national Treasury to mobilise and register enterprises run by youth, women and persons with disability for prequalification in order to supply a minimum of 30 percent of all tenders in government.
However, statistics indicate that only one per cent of women and youth own property and that makes it very difficult for them to provide collateral for banks to give them access to credit facilities. Most women and youth who venture into businesses and need financing lack the needed collateral to enable them secure bank loans. Further, to obtain loans, banks require that the enterprises show credit records. Unfortunately majority of this marginalised groups of people do not fully understand the requirements of getting and paying loans. Loans from Kenyan microfinance institutions tend to be limited in amount, have no grace period, are short term in design and carry very high interest rates.
Scheme Formal financial support on the other hand is seen to be too expensive for many women and youth entrepreneurs and hence they treat this as a last resort. The Kenya Women Parliamentary Association (KEWOPA) has voiced concern over the lack of resources saying that whereas the preferential provision is a great beginning, there is
All members of KEWOPA will be actively involved in championing the procurement and Uwezo Fund initiatives.
here is no doubt that most Kenyans are very enterprising going by the number of chamas (investments clubs) that have mushroomed across the country over the years. It is normal these days to see groups of women and men both in the urban, rural and informal settlements like Nairobi’s Kibera, Mathare and Korogosho spend part of their weekend meeting around a table in their respective homes, neighbourhhood pubs, restaurant or hotels to contribute towards a merry-goround savings scheme that have become very popularly. They are also called table banking schemes. The initiative that was started by a handful of women several decades ago has now taken a life of its own and has been embraced by the youth and men with the support of micro-based enterprises, leading banks and even the Kenya Government. No longer do the chamas have to plead with bank managers to open accounts for them and
President Uhuru Kenyatta is given an illustration about some products supplied to the Defence Ministry by a young woman entreprenuer Taby Rose Wanja at the official opening of the Women, Youth and Persons with Disability Expo on Access to Government Procurement Opportunities at K.I.C.C, COMESA Grounds. Looking on is Defence Cabinet Secretary Ambassador Raychelle Omamo. need for caution. Speaking during the official launch of the 30 per cent affirmative action of Government procurement for women, youth and persons with disabilities at KICC, Cecily Mbarire, chairperson KEWOPA says that the Government must come up with a National Credit Guarantee Scheme to ensure that only disadvantaged groups access opportu-
nities to do business with government. “We are asking the Government through the three funds — UWEZO, youth and women — to come up with a National Credit Guarantee Scheme so that the targeted groups are able to finance the tenders,” reiterated Mbarire. She added: “This will ensure that beneficiaries get money through their Local Purchase Orders (LPOs), supply
and pay back the money.” At the same time, Mbarire noted that most of the procurement opportunities earmarked under the quota include supply of flowers and stationery, sweeping and bush clearing. “While this is a good beginning, do not make them the only available Continues on page 4
DEVOLVE FUNDS WITH A DIFFRENCE give them loans, the tables have now been literally turned and it is the managers who are wooing them at all costs. It is in that spirit that the Government led by President Uhuru Kenyatta, launched the ambitious Shs5 billion Uwezo Fund targeting women and the youth who have over years complained of being sidelined and discriminated against by most financial institutions and the Government. The days of the mama mbongas (vegetablesellers) and jua-kali artisans (hot sun artisans) lamenting forever over lack of access to funds are now over and time has come for the thousands of unemployed and/or small scale women and youth traders to literally roll up their sleeves and get to work by coming up with creative, practical and exciting business proposals that will make them make a breakthrough in the competitive business world. They have felt shortchanged in the past by politicians during electioneering campaigns promising them haven and delivering nothing
tangible. The women and youth now have a golden opportunity to turn their dreams into a reality by forming themselves into groups, for those who had not, coming up with a business proposal and then applying for the said funds. And they need not look too far to emulate best practices by the most successful chamas whose members have gone places by learning from success stories of clients of such icons in the financial sector as Kenya Commercial Bank, Equity Bank, Co-operative Bank, KRep, Jami Bora and the Kenya Women Finance Trust among others. Unlike previous devolved funds like the popular Constituency Development Fund, the Youth Empowerment Fund and the Women’s Development Fund, the Uwezo Fund seeks to make a bigger impact on the youth and the women by releasing a maximum of Sh0.5 million per group to venture into any business of their choice. And in order to enhance transparency and accountability, the final cheque would be issued in public to avoid controversy, corruption and
politicisation of the noble project. All applicants must be in a registered group and be vetted by Uwezo Fund Committee whose patron in each of the 47 Counties will be the respective women representative to the National Assembly , elected in the March 4 General Elections. The other criterion is that the group’s business proposal must be viable and the members must have the ability to refund the loan within four months. So far so good, the programme has taken off smoothly and all eyes are on the second phase of implementation which might not be as straightforward. One area to watch is the presidential directive to all Government departments to reserve 30 per cent of government procurement for the youth, women and people with disabilities. Indeed, this devolved fund has come at the right time for most Kenyans of all walks of life to rally around it to promote unity, create jobs, boost the economy and give our thousands of jobless women and youth reason to eke a decent living and have some hope in a better Kenya.