The Central Bank of Kenya Governor Dr. Njoroge has launched a mobile based loan facility for micro, small and medium scale enterprises (MSMEs) in a collaboration with five commercial banks. The banks are Commercial Bank of Africa (CBA), Cooperative Bank of Kenya (Coop Ban), Diamond Trust Bank DTB), Kenya Commercial Bank (KCB) and NIC Group.

The loan facility is expected to improve access to credit for MSMEs. This is because, this segment has generally been locked out of the formal credit market due to the informal nature of their records and lack of collateral for secured loans.

Being a mobile based credit scheme, customers will access the loans through a mobile application. Once the client borrows the loan, it will be credited to the customers wallet. Under the scheme, clients will be able to access loan products ranging from Ksh. 30,000 upto Ksh. 250,000 with a repayment period of 1-12 months at an interest of 9% per annum. The other charges are a facility fees of 4 per cent, insurance fees of 0.7 per cent of the disbursed amount  and excise duty which is 20 per cent of the facility fee.

Just like any other loan product, customers will be analysed and advised on their credit limits. Clients will also be eligible for a top-up once they repay 80% of the loan or have a track record of three months repayment.

The pilot phase of the credit scheme will be two weeks and will involve 3,500 traders. The second roll out will involve 10,000 traders who will be registered as Stawi agents and will be involved in the second round of tests of the app.

Speaking at the launch of the loan product in Gikomba, the CBK Governor, Dr. Patrick Njoroge had this to say, “Small and mid-sized enterprises are the lifeblood of any economy but many have struggled to secure the necessary financing to continue operations in the current economic climate. As such we are excited to work with the five banks to minimize the complexity of developing new and accessible loan offerings as they bring much needed capital to this underserved yet vital segment of the market.”

Dr Njoroge also added that the cooperation between the five banks will allow them to reach out to a growing number of small enterprises thus promoting job creation and income generation with a multiplier effect in the economy.