This archive report was first published on 4 August 2020.
On August 4, 2020, the National Assembly Committee on Finance and National Planning proposed significant changes to the Public Finance Management Bill, 2020, aimed at protecting the ordinary Kenyan taxpayer. One of the key proposals is to limit the period a business can take to repay a loan to six months. This move is seen as a step in the right direction to ensure that struggling small and medium-sized enterprises (SMEs) do not take advantage of government lending schemes.
The State's credit guarantee scheme, which seeks to ease credit access for risky borrowers, especially SMEs, by providing third-party credit risk mitigation, has been met with skepticism. Critics argue that it may not be a free lunch for struggling SMEs, as the government may seize their businesses and auction them to recover the money owed to the public after the six-month repayment period.
However, proponents of the scheme believe that it has the potential to attract other investors to go into business, eventually growing SMEs into big businesses. The positive response from the European Union, which has pledged to put Sh11.7 billion into the kitty the government is setting up, and the expected infusion of extra capital from the World Bank and the African Development Bank are seen as evidence that the scheme will have enough money.
It remains to be seen whether the National Assembly will follow up on this recommendation to its logical conclusion and come up with a law that requires the government and private institutions to pay their bills within 30 days. This would ensure that SMEs have adequate cash flow to meet their financial obligations, including the repayment of bank loans.
