SMEs to rebound faster after lockdown, curfew

Monday, July 6th, 2020 00:00 |
Financial institutions restructured loan agreements with clients to conform to their needs. Photo/PD/FILE

FINANCE:  Small and micro-enterprise financiers see a quick turn-around ahead of  the president lifting inter-county lockdown, even as they forecast formal economy to hurt longer.

Banking on their customers’ abilities to bounce back from disruptions, micro-finance institutions (MFIs) believe self-employed individuals will be able to conciliate operations sooner upon relaxation of the cessation of movement, compared to other sectors.

Speaking to Business Hub on the outlook of the sector, ECLOF Kenya chief executive Mary Munyiri says with the easing of restrictions, micro credit demand will pick up since small borrowers will be in the market for funds to quickly reorganise their businesses.

Surge in loans demand

“Our credit facilities are strategically targeting the vulnerable groups, most of whose businesses have been impacted by these restrictions and I can only see a surge in demand for our loans if the President lifts such restrictions in his national address,” said Munyiri.

Peter Macharia, a financial expert and the chief executive officer at Jijenge Credit forecasts a scenario that will see loan disbursements to existing SME customers continue but micro-lenders will be cautious to extend credit to the new ones during the extension period.

“Micro-entrepreneurs are ordinarily known to be much more resilient than bigger companies, and while we are optimistic an ease to restrictions is likely, I can only predict a tougher working environment going forward if the lockdown procedures are extended with our loan collections for instance on a free fall,” he said.

Prolonged restrictions of movement will also see MFIs further defer loan repayments for longer periods.

“There have been slow payments, and liquidity has been affected,” says the Ceo of Micro-cap Holdings Philip Kibet, adding that the move will also affect banks which he says may resort to unsecured lending practices or stick with previous borrowers.

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