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{
"id": 50125,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/50125/?format=api",
"text_counter": 243,
"type": "speech",
"speaker_name": "Mr. Kenyatta",
"speaker_title": "The Deputy Prime Minister and Minister for Finance",
"speaker": {
"id": 168,
"legal_name": "Uhuru Muigai Kenyatta",
"slug": "uhuru-kenyatta"
},
"content": "(2) The Fund is being implemented through banks, namely; the Co-operative Bank of Kenya, Equity Bank and K-Rep Bank. These banks were selected through a competitive tender process in accordance with the provisions of the Public Procurement and Disposal Act. The selection criteria amongst other areas of assessment include the following:- (a) Matching contribution ratio to loan from the Government. The minimum matching ratio of Kshs5 for every Kshs1 is provided by the Government to be lent to the target clients. The minimum matching contribution of 50 cents for every Kshs1 is provided for by the Government as capacity building grants. (b) M-Banking platform that ensures efficiency of delivery systems, office or robust platform to remotely reach large numbers and lower costs to make credit more affordable to the target clients. (c) Existing outreach capacity assessed on the basis of infrastructure linking the banks to the informal sector through existing branch networks and agent banking arrangements, ability to mobilise the target clients and prepare them for credit and other banking and financial services. (d) Capacity building and capacity assessed by examining the following:- (i) Bankâs existing infrastructure for capacity building, ability and commitment to match the Governmentâs capacity building grant with the bankâs own funds. (e) Sustainability of the Fund and banksâ strategies for continued outreach to the target groups. On average, the market lending rates for the sector range from 20 to 30 per cent based on their risk profiles. Participating banks will continue to bear the credit risk under this programme and it has been agreed with them that the interest to be charged to the target groups should be affordable. (3) The Fund includes capacity building component for banks and their banking agents to improve the effectiveness and outreach to the MSCs and the final beneficiary to increase their knowledge on business management and available banking products and services. This capacity building also includes training and systems development that will ensure that the Fund is sustainable and the MSEs become regular banking clients. The Kshs800 million for capacity building will, therefore, be channelled in tranches over a period of time through the participating banks to achieve the goal. The capacity building funds while initially will be shared on an equal basis amongst the current banks, in future the additional disbursements will be based on measureable performance by the current and future participating banks. (4) The Office of the Deputy Prime Minister and Minister for Finance has not authorised any personal organisation to recruit members or charge registration fees to access the Fund. Any person purporting to be registering members for the purpose of accessing funds from the selected banks is, therefore, acting illegally. (5) The Fund is a revolving Fund through which the Government enters into a long-term credit facility agreement with selected banks for on-lending to MSEs through branches authorized, banking agents and other channels, particularly mobile banking. Due to the longer duration of the credit facility, it allows the banks to advance term loans to their clients. (6) The Fund is accessible in all the counties through the participating banks. The selected banks will use their own internal criteria to avail funds to qualified applicants. The banks are required to match the Fund at a minimum of Kshs5, as I said, for every Kshs1 invested by the Government. This will, therefore, leverage the Fund fivefold to a minimum of Kshs15 billion. (7) As indicated above, the main benefit expected from the Fund is increased access to affordable credit by MSEs. It is known that the current market lending rates range from 20 to 30 per cent for MSEs, which is way too high for the MSE segment. With this programme, we expect significant reduction in transaction costs through the economies of scale and leveraging of ICT and mobile banking as channels of loan disbursements and repayments. It is, therefore, expected that this will translate to more affordable interest rates, not only from the funds lent by the Government to the banks, but also from their own funds. This will in turn result in higher productivity of the informal sector business, increase formalization of the informal sector, improve turn-over and profits for MSEs and ultimately, lower the cost of doing business and generate employment opportunities, particularly amongst the youth. Last but not least, I wish to refer hon. Members to the Press Statement that was issued on Thursday, 14th April, 2011, by the Office of the Deputy Prime Minister and Minister for Finance which was carried on Page 25 of the Standard newspaper and Page 48 of the Daily Nation newspaper. It explained in detail, the objectives of the Fund, eligibility criteria, how the Fund works, benefits of the Fund, related services, the participating banks and the national coverage."
}