Laikipia County secures another funding to cushion SMEs from COVID-19
George Kebaso @Morarak
The County Government of Laikipia has inked a Sh300 million deal with Cooperative Bank aimed at availing financial credit to inject the much needed capital for take-off of businesses and cooperatives in the expansive county.
This is barely two weeks since the County Government signed a partnership agreement with Kenya Commercial Bank (KCB) worth Sh2 billion to support 5,000 business entities in the Micro, Small and Medium Enterprises (MSMEs) within the county to help them weather the COVID-19 crisis.
According to Governor Nderitu Muriithi the deal with Cooperative Bank is an economic stimulus facility to provide discounted credit to businesses and cooperatives.
“Earlier this morning, I presided over the signing of a three hundred million (Kes 300 million) economic stimulus facility with the Cooperative Bank.
“Through this facility, the bank will partner with my government to provided discounted credit to businesses and cooperatives in Laikipia as an effort to inject capital infusion for our businesses and enterprises to take off,” the Governor told journalists at the Council of Governors (CoG) head office in Nairobi yesterday.
He said the move is in the background of the negative economic impact caused by the ravaging Covid-19 pandemic on the conduct of business in the country and across the world.
Muriithi who was accompanied by the County’s Executive members of Trade and Finance, said that small and medium enterprises in the counties had unfortunately been hard hit by the lockdown and the attendant effects of the pandemic.
“As we gradually move towards the reopening of the economy and the normal of living with an endemic reality of Covid-19, there will be great need therefore to support enterprises and businesses to lift themselves up to their pre-Covid19 levels,” he said.
Many enterprises and businesses across the county, he said have witnessed outright closure or an unprecedented slowdown in their revenues which calls for this intervention.
However, according to the Governor, this will not happen overnight and will require the support to enterprises and SMES at least in the immediate.
“Our partnership with Cooperative Bank proposes to enter into an agreement of a Sh300 million facility for provision of business loan facilities to enterprises and the cooperative societies in Laikipia on an interest sharing and guarantee model.
“To further ground the partnership, today's MOU signing was necessary to formalize the agreement to capture fully the intentions and agreement between the parties,” he said.
The Bank’s director in charge of Cooperatives Banking Division, Vincent Marangu said to kick-off the Fund under the Interest-Sharing and Guarantee Arrangement; the institution will support the county in two ways.
“Number one, we are supporting the county government to empower co-operatives through affordable financing and Consultancy Services, in order for them to have sufficient liquidity for lending to members, and strengthen their management structures, and secondly, to support over 7,000 entrepreneurs in Laikipia County recover from the challenges of the Covid-19 Pandemic by way of affordable financing and training,” he said.
Marangu said borrowers will pay single-digit interest rates, which makes the arrangement perhaps the most affordable lending program in Kenya today.
“The low interest rate has been made possible by the interest-sharing arrangement, whereby the Laikipia County Government will be offering an interest subsidy of 5 per cent, thereby reducing the bank lending rate from 12.1 per cent to 7.1 per cent per annum for all borrowers,” he added.
In addition, borrowers will enjoy a reduced appraisal fee at 1.5 per cent of the approved loan amount.
“Co-op Bank will match three times the amount that the County Government will place in the Enterprise Fund, to ensure as many borrowers benefit from the opportunity. In addition to financing, the bank will make available the full basket of services that include digital banking tools, workshops for business training, and capacity-building consultancy services for co-operative,” he said.
The repayment period for the loans will be up to 12 months for SMEs and up to 18 months for co-operatives.
It also emerged that the county government shall undertake initial vetting of loan applicants as provided for in the Laikipia County Enterprise Fund Regulations 2020, then Co-op Bank will further appraise for qualification.
“The Laikipia Enterprise Fund commences operations immediately,” said the Governor.
On June 25, the County Government entered into a financing deal with KCB that will see the bank providing affordable loan facilities to enterprises and cooperative societies whose businesses have been affected by the outbreak of the pandemic.
In the arrangement, the County Government will pay part of the interest while business entities and cooperative societies pay the balance.