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Small businesses lenders’ dilemma as interest control law comes into effect

Thursday September 15 2016

Clients queue to be served in a banking hall. The banking association

Clients queue to be served in a banking hall. FILE PHOTO  

By OTIATO GUGUYU, @googooyuh [email protected]

Small businesses previously financed by concessional non-bank lenders are finding themselves paying a premium as the rate capping came into force yesterday forcing financiers back to drawing board.

The SMEs were enjoying rates slightly below market rates that could change with the Banking Amendment Act.

Kenya’s oldest small and medium enterprise lender Industrial and Commercial Development Corporation (ICDC) executive director Kennedy Wanderi told the Business Daily it would review the rates traditionally lower than market rates.

“We will be announcing new rates before the end of the month which logically will be lower than the market rate,” he said.

The ICDC, which has set aside Sh1 billion to fund small and medium sized companies through micro finance institutions, has been lending at a base rate of 13 per cent with an average overall rate of 16 per cent before the cap was introduced.

The state-backed body offers between Sh5 million to Sh300 million credit and at times buys into SMEs, which offers flexibility in terms of repayments.
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