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Government Plans to Boost Credit Guarantee Schemes
Source: Google Alert
Source Date: Wednesday, November 23, 2011
Focus: Electronic and Mobile Government, ICT for MDGs, Knowledge Management in Government, Citizen Engagement, Institution and HR Management
Country: Kenya
Created: Nov 23, 2011

This venture will address the provision of critical support to businesses ranging from investors in infrastructural projects to exporters, contractors and small and medium enterprises (SMEs), all of whom in the past have been faced with unique and sector- specific financial challenges.

“Falling in this category are Credit Guarantee Schemes which originated inEurope in the 1990s to support export and domestic trade and infrastructural development,” Muthaura said.

He noted that following their outstanding success, these financial instruments have continued to gain popularity with major successes reported in the U.S. , Chile , South Korea , Malaysia , Turkey , Singapore , Thailand and South Africa .

“The Kenyan government has in the past recognized the potential benefit of a functional credit guarantee system and made financial contribution towards the establishment of the African Trade Insurance Agency ( ATI ) and by assigning the responsibility of establishing a vibrant export guarantee facility to the Ministry of Trade and more specifically the Export Promotion Council.”

In Kenya , small enterprises have from 11 to 50 workers while medium enterprises have from 51 to 100 workers, thereby comprising the lion’s share of enterprises in Kenya .

Of all the problems faced by the SMEs, non-availability of timely and adequate credit at reasonable interest rate is one of the most important.

One of the major causes for low availability of bank finance to this sector is the high risk perception of the banks in lending to SMEs and consequent insistence on collaterals which are not easily available with these enterprises.

Muthaura said the successful implementation of a functional policy and institutional and regulatory framework will provide strong financial support to facilitate access to favorable credit businesses including suppliers of goods to government.

 

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