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CS Chelugui underscores need to devise ways of financing MSMEs

CS Simon Chelugui
Cooperatives and MSMEs Development Cabinet Secretary Simon Chelugui. PHOTO | File

Lack of access to affordable financing has been an impediment to efforts by Micro, Small and Medium Enterprises (MSME) to stimulate development across the African continent.

This, despite the fact that the MSME sector plays a significant role in employment creation, poverty reduction, creativity and innovation, supply chain linkages as well as social and community development.

It is estimated that 51% of the over 44 million MSMEs in the Sub-Saharan region require more funding than they can currently access.

“Without reliable and affordable sources of working capital, MSMEs are unable to make the necessary investments to facilitate growth as well as tap into available markets such as EAC, COMESA and AfCFTA. The financing challenge is primarily based on two  parameters of accessibility and affordabilit,” submitted the Cabinet Secretary for Cooperatives and Micro, Small and Medium Enterprises (MSME) Simon Chelugui when he spoke Wednesday during the Kenya International Investment Conference in Nairobi.

Chelugui is now calling on African countries to devise ways that will ensure easy access to finance by MSMEs to stir up development.

Citing the unprecedented opportunities to MSMEs both in the urban and rural settings brought about by high mobile phone penetration in the  continent, the CS observed that there is need to develop strategies that give the  highest priority to MSMEs in terms of government policy responses  and interventions.

“The Africa Continental Free Trade Agreement (AfCFTA) with a combined GDP of USD 3.4 billion provides a significant platform for MSMEs to expand their market reach, enhance competitiveness, access new opportunities, and promotes inclusive and sustainable development in Africa,” said Chelugui who told the gathering of how MSMEs in Africa are highly vulnerable to economic shocks such as the one created by the COVID-19 pandemic.

“Despite this important market access opportunity, MSMEs at present are unable to fully tap into this opportunity due to a range of obstacles one of which is lack of access to finance to not only modernize their production processes but also working capital to produce the required quantities to meet the market demand.”

To ensure financial inclusion in the country amid a litany of challenges that MSMEs face such as lack of collateral, the CS gave an example of the Hustler Fund flagship programme that was launched by the government few months ago with an aim of deepening financial inclusion for millions of citizens and MSMEs who  have for a long time been excluded from the mainstream financial system products.

The fund which offers between Ksh.500 – Ksh.50,000at an interest rate of 8% per annum, he says, has in  just over 5 months provided affordable credit to over 20 million borrowers with over Ksh. 29.2billion disbursed.

The total repayment stands at over Ksh.19.16 billion representing over 65%.

In developing countries, world, the MSME sector  constitutes 90% of the private sector and creates more than 50% of  jobs in their respective economies.

In Africa, the MSMEs sector creates an estimated 80% of jobs across, representing an important driver of  economic growth.

Sub-Saharan Africa alone has an estimated 44  million MSMEs, with a bulk of these in the micro category.