PRESS RELEASE
December 4th 2015

Leading experts in business development and economics joined forces in Nairobi on 3 December 2015 to tackle the lack of understanding of SME finance in Kenya.

SME finance is one of the fastest growing yet least understood segments of the economy. Despite rising interest in the sector, Kenya still lacks rigorous analysis on the size and evolution of the market. The goal of the first ever SME Day was to promote understanding of the rapidly changing sector and to drive innovation within it.

Discussions on SME Day used findings from FinAccess Business, a research project conducted jointly by FSD-Kenya, the World Bank, and the Central Bank of Kenya (CBK), to improve understanding of the SME market on both the supply and demand sides.

Why SME finance? 

SME loans represent almost a quarter of total loans in Kenya. Bank lending to SMEs was KSh332 billion (est.) in December 2013, representing 23.4% of the banks’ total loan portfolio.

The SME portfolio is growing fast. Between 2009 and 2011, the total SME portfolio rose from KSh133 to KSh225 billion, and from 19.5% to 20.9% as a percentage of total lending.

Developing SME finance represents an under-tapped opportunity. Innovation in the sector has been slow. Overdrafts represent over 40% of total SME loans. The uptake of invoice-based finance, such as factoring or invoice discounting, and asset finance, such as leasing or hire purchase, has been slow.

Problems exist on both the demand-side and supply-side. On the demand- side, there is no systematic analysis on the numbers, characteristics, and challenges to access to finance for SMEs. Kenya lacks a comprehensive list of active business establishments. It is therefore impossible to measure the number of new entrants in different segments of the economy and the survival rate of young firms, or their capacity to create employment, to grow, and to use credit for productive investments. Financial sector players lack key information on this target market and cannot respond dynamically to changes in the market.

On the supply-side, the data collected on bank financing of SMEs is limited. Banks do not report data specifically on their SME finance portfolios, and therefore industry players and the Government lack data on market size, the exposure of banks to the segment, and the product portfolio available to SMEs.

SME Day looked at what we know and what we don’t know about SME finance and provided participants with a better understanding of the risks and opportunities in an heterogeneous SME market. The event also explored the use of knowledge to drive innovation, and established priorities in the policy agenda.

Presentations:

• Are informational enterprises a drag on productivity in Kenya? by Mehnaz Safavian
• Growth oriented SMEs: Understanding their needs and risks by Dinah Bennett
• The supply and demand for SME finance in Kenya by Edoardo Totolo

About FinAccess Business

FinAccess Business provides a comprehensive trend analysis on the supply of SME finance in Kenya between 2009 and 2013. In addition to quantifying the size of the market and its growth rate, it shows the exposure of different types of banks in the segment, the portfolio of services most used by SMEs, and the quality of assets. The FinAccess Business – Supply report also discusses the regulatory framework for SME finance, the drivers and obstacles of banks’ involvement with SMEs, and their specific business models.

About FSD Kenya

FSD Kenya was created in 2005 to stimulate wealth creation and decrease poverty. It achieves this by working in partnership with the Government of Kenya, the financial services industry and business. An independent trust, supervised by KPMG, FSD Kenya (Financial Sector Deepening) is celebrating its tenth year of bringing financial services to an ever-increasing number of people and small businesses across Kenya.

Contacts

Joyce Omondi, Communications Manager, FSD Kenya | joyce.omondi@fsdkenya.org

Tamara Cook, Head Digital innovations, FSD Kenya | tamara.cook@fsdkenya.org

FSD Kenya, 5th Floor KMA Centre, Mara Road, Upper Hill

Tel: (020) 2923000 | Website: www.fsdkenya.org