State provides additional 300 million shillings for loans to small factories


Economy

State provides additional 300 million shillings for loans to small factories


The new Kenyan banknotes. AFP PHOTO

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Summary

  • The ministry aims to advance 2 billion shillings to small factories, mainly in the manufacturing sector, through Kenya’s industrial estates.
  • State-guaranteed loans are expected to create some 4,000 micro and small businesses, up from the 3,400 businesses targeted this year.
  • KIE loans largely help companies buy machinery and build working capital with the aim of boosting rural industrialization.

The Ministry of Industrialization and Commerce plans to increase loans to small factories by 300 million shillings in the year starting in July, signaling an increase in funding for industrial projects in peri-urban and rural areas.

The ministry aims to advance 2 billion shillings to small-scale factories, mostly in manufacturing through Kenya Industrial Estates (KIEs) in the financial year 2022-23, an increase of 17.6% against the budget allocation of 1.7 billion shillings this year ending in June.

State-guaranteed loans are expected to create some 4,000 micro and small businesses, up from the 3,400 businesses targeted this year.

KIE loans largely help companies buy machinery and build working capital with the aim of boosting rural industrialization.

The leather, textiles and agribusiness sub-sectors have been mapped as low-lying fruits in an effort to revive and upgrade Kenya’s cottage industries under the manufacturing pillar of the Big 4 Agenda.

If reached, it will be the biggest expense for cash-strapped entrepreneurs in more than a decade.

Ministry data shows KIE advanced a record 1.22 billion shillings in the year ending June 2020, helping set up 2,443 businesses.

This funding, however, more than halved to 982.3 million shillings the following year, helping some 1,964 small businesses.

Since the onset of Covid, the development financier has focused on lending to businesses hardest hit by the shocks of Covid-19.

Indigenous businesses

“KIE participated in the Post-Covid Economic Recovery Program (PC-ESP) and put in place support measures for MSMEs severely affected by the Covid-19 pandemic,” the ministry wrote in its budget report.

Established in 1967 to finance indigenous entrepreneurs, KIE typically offers loans of between 100,000 and 20 million shillings at 10% annual interest, repayable in eight years with a grace period of up to 12 months.

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