This archive report was first published on 23 June 2020.
On June 23, 2020, the Treasury unveiled new regulations for the Biashara Fund, a move that will see the Uwezo Fund and Women Enterprise Fund wind down. The Biashara Fund will provide cheap business loans to youth, women, and persons with disabilities at an annual interest rate of six per cent.
Data from the Central Bank of Kenya shows that commercial banks were lending at an average of 11.92 per cent in April, higher than the proposed new rate. The regulations state that the interest payable on a loan advanced to the persons referred to in regulation 13 shall be at the rate of six per cent per annum on a monthly reducing balance.
The Biashara Fund will start with seed capital of Sh2 billion to be allocated by Parliament. Money borrowed from the fund will be used for business only, with applicants expected to prove they have established businesses. The fund will also lend some of the money to intermediaries, such as commercial banks, who will in turn lend to the special groups at a maximum rate of 10 per cent.
However, not more than 25 per cent of the fund’s cash will be lent to intermediaries. The government will lend to banks at an annual interest rate of three per cent, though the fund’s advisory board can vary this to a minimum of one per cent. Banks will not lend more than Sh3 million to a single borrower from the funds.
