Local manufacturers have signed a deal which establishes the Industry Credit Group to reduce credit risks associated with late payments upon delivery of goods.
The Kenya Association of Manufactures attributes liquidity challenges that have dogged suppliers of locally manufactured goods to delayed payments which have soared since the outbreak of COVID-19 in March.
The Memorandum of Understanding between KAM, Veri-Credit and Association of Kenya suppliers establishes the KAM Industry Credit Group, a body to be charged with promoting the proactive mitigation of credit risk management by business.
KAM says the group which is the first system in the country, will be managed by Veri-Credit with the aim of promoting best credit practices between businesses and their suppliers under trade associations.
It will also seek to significantly improve businesses’ cash flow and drive a change in overall payment culture in Kenya, the association said.
KAM Chair, Mr Mucai Kunyiha noted that the partnership has come at a critical time when businesses are facing cash flow and liquidity challenges due to late or non-payment of bills by both the government and the private sector.
“Many businesses experience a lot of administrative and financial burdens due to late and non-payment. Prompt payment is therefore critical to the performance and operations of any business, more so the small and medium-sized enterprises (SMEs),” said Kunyiha, KAM Chairman.
He went on, “Bad debts and poor debt collection methods contribute to the challenges facing small businesses. When small businesses do not get their payments on time it means that they are also not able to pay their suppliers. Late payments to SMEs stifles innovation and growth of the manufacturing sector.”
Veri-Credit Director, Mr Stephen Mills noted that the partnership is a step in the right direction for manufacturers, suppliers and Kenyans.
“This is a creative, and practical payment solution of immense value to manufacturers and suppliers. It shall have a positive impact on the economy, by protecting jobs through enabling cash flow and liquidity for businesses across the country,” remarked Mr Mills.
AKS CEO, Ishmail Bett also noted that perennial prompt payment challenges have impacted on suppliers and expressed optimism that the partnership shall resolve them.
Globally, Trade Association Industry Credit Groups are membership-based and work by permitting credit professionals (in different association member companies) serving the same customer, to compare payment practices.
They compare negative information on collective history and exchange data on payment practices.