Home
Commodities
Market News

Personal details
Change password
Purchases
Sign out

Home
News
Business
Opinion
Science & Health
Magazine
- Commodities
- Market News
Sports
- Commodities
- Market News
Rest of Africa
- Commodities
- Market News
Kusi Ideas
- Commodities
- Market News
Podcasts
Videos
Sponsored

State-backed guarantee scheme lends Sh6.2bn to SMEs

Tuesday, March 12, 2024 — updated on September 02, 2025 - 3 min read

The National Treasury building in Nairobi.

Photo credit: File | Nation Media Group

By Kepha Muiruri

Business Reporter

Nation Media Group

Thank you for reading businessdailyafrica.com

The State-backed credit guarantee scheme, which seeks to enhance loan access to credit by micro, small and medium enterprises has registered sluggish growth to disburse a cumulative Sh6.2 billion by December 2023 since its launch three years ago.

The scheme, which seeks to share default risks with banks and thereby increase the pool of funds available for lending, had disbursed Sh5.8 billion as of June 2023.

“The credit guarantee scheme established in October 2020, continued to support additional credit uptake by vulnerable micro, small and medium-sized enterprises (MSMEs),” the Central Bank of Kenya (CBK) notes in new disclosures. “As at the end of December 2023, all seven banks had disbursed guaranteed loans to MSMEs amounting to Sh6.2 billion.”

Related

Economy

SMEs receive Sh2bn funding under State-backed credit guarantee scheme

Mar 16, 2022 - 2 min read
Economy

Informal workers to access State-backed mortgages under new plan

Dec 01, 2023 - 5 min read

The Treasury had provided a seed capital of Sh3 billion, a move that was expected to result in total lending of Sh12 billion. The scheme undertakes to absorb a loss of up to 25 percent of the principal in case of a borrower’s default. The maximum loan size per borrower is Sh5 million with a term of three years and up to five months grace period, with a discounted interest rate based on the businesses’ risk profile.

Read: SMEs access Sh4.6bn State-backed loans

The disbursements so far represent just 0.79 percent of the value of active MSME loan accounts in the banking industry as of the end of December 2022 or Sh783.3 billion according to CBK’s annual banking supervision report.

The weak performance of the programme shows its challenges which have been highlighted previously, including the informality of small and medium enterprises and the low awareness of the product at the marketplace.

According to the annual performance report for the scheme covering the financial year to the end of June 2022, the Treasury lists the requirement for the registration of beneficiaries as a roadblock to the utilisation of funding under the scheme.

“Most MSMEs are informal and hence are not tax compliant and most of these enterprises are not registered by the relevant government agency, as required in the credit guarantee scheme regulations,” the exchequer stated. “Utilisation of credit guarantees as at June 30 2022 was at 35.9 percent and had started to stagnate towards the end of the financial year.”

Other factors listed as challenges affecting the implementation of the credit guarantee scheme include SMEs that do not meet the criteria off definition under the MSME Act, the misclassification of some small businesses and external shocks such as supply chain constraints.

The exchequer has also highlighted a moral hazard which presents the challenge of creating awareness on the credit guarantee while safeguarding the scheme.

The National Treasury has highlighted various remedial measures to revitalize the scheme including the on-boarding of additional financial intermediaries to the scheme to enhance uptake of credit guarantees across regions.

The exchequer also highlights the formalization of MSMEs and a review on the classification of the businesses as further remedial measures.

The credit guaranteed scheme is currently delivered through a risk-sharing agreement between the government and seven participating banks –Absa, Co-operative Bank of Kenya, Credit, DTB, KCB, NCBA and Stanbic.

The risk-sharing plan provides an incentive for the banks to offer better credit terms for qualifying businesses.

Read: SMEs bag Sh3.3bn under State credit guarantee programme

The scheme was formulated as a solution to MSMEs constrained access to finance, for capital and operational demands, market challenges and weak business strategies.

“Further, MSMEs that access credit face unfavorable loan conditions due to lack of sufficient collateral, high collateralization requirements, short payback periods, informal markets, inaccurate data and high-interest rates since they are viewed as risky by financial institutions,” the National Treasury added.

→ [email protected]

Get it First!

Get Breaking News Delivered to your Inbox.

Conflict

Companies

Telkom billions trail fades on multi-country barriers

Sep 19, 2024 - 5 min read
Columnists

Inside the investors’ safety nets in Kenya’s new privatisation plan

Mar 18, 2024 - 3 min read
Companies

Cytonn fails to secure more time for funds compliance

Mar 18, 2024 - 4 min read
Columnists

Essentials for sustained economic growth in Kenya

Mar 18, 2024 - 4 min read

Latest

Meta

Frequently Asked Questions

Sep 25, 2024 - 4 min read
Meta

Cookie Policy

Sep 24, 2024 - 5 min read
Meta

Terms and Conditions

Sep 24, 2024 - 15 min read
Companies

Telkom billions trail fades on multi-country barriers

Sep 19, 2024 - 5 min read

In the headlines

Companies

US think-tank taps Kenya's outgoing UN envoy

Mar 19, 2024 - 3 min read
Meta

Frequently Asked Questions

Sep 25, 2024 - 4 min read
Meta

Cookie Policy

Sep 24, 2024 - 5 min read
Meta

Terms and Conditions

Sep 24, 2024 - 15 min read

Oops

We're sorry, we couldn't load the article

If you have an Ad-blocker please disable it and reload the page or try again later.

Follow us

Apps

Support

Contact Us
Frequently Asked Questions

Tools

This Week's ePaper
News Feed
Events

Legal & Privacy

Terms and Conditions
Privacy Policy
Cookie Policy
Our Blog Rules

Nation Africa
The Citizen
Nairobi News
Mwananchi
NTV Kenya
Mwanaspoti
NTV Uganda
Business Daily
Daily Monitor
Nation Media Group

Nation Media Group © 2026