Kibaki pitches for funding small firms

Kenya President Kibaki on Thursday called for cheaper sources of financing for the micro-finance sector, saying some of the sources were not affordable to majority of entrepreneurs.

The President, who was opening an international conference at the United Nations offices in Gigiri, said donors and development partners were increasingly adopting equity and debt financing at market rates, which were expensive for majority in Africa.

“This source of financing is not affordable to majority of micro-finance players in Africa.

There is need to consider collaboration that builds sustainable capacity within the sector,” he said.

The grand duchess of Luxembourg, Maria Teresa, who was the main guest supported the President’s views, adding that micro-finance should be extended to rural areas that were not covered.

The President told players in the sector not to lose focus by insisting on returns but to also take pride in the social benefits accruing, as it was the major objective of microfinance.

“It would be unfortunate, if with increased commercialisation and pressure to provide ever growing returns to investors, the social mission of micro-finance is lost,” he said.

Most active

He observed that micro-finance institutions in Africa are among the most active in the world, if measured by the number of borrowers and savers per staff member.

However, he added that operating and financial expenses in these institutions were high, and, on average, revenues remained lower than in other regions.

Kibaki said innovations like mobile banking, product refinement, and strengthening the capacity of micro-finance institutions will assist in reducing costs, increasing out reach and boosting profitability and sustainability.

A study on micro-finance in Africa Diagonistic to Action was unveiled, which provides 26 recommendations on how to improve the sector’s performance.

Mr Kibaki noted that only one in five households in Africa had access to formal financial services, adding that for the countries to achieve the millennium development goals, majority had to access financial services.

He said the micro-enterprise sector accounts for over 75 per cent of the total national employment, and contributed 18 per cent of gross domestic product (GDP).