This archive report was first published on 5 October 2021.
Post COVID-19 intervention for MSMEs through Credit Rotational Funds ¶
Kenya's economy was robust and resilient before the COVID-19 pandemic, expanding by 6.3% in 2018 and 5.4% in 2019. However, the pandemic led to a contraction of the Kenyan economy by -0.1% in 2020, forcing the government to deploy both fiscal and monetary policies to cushion its citizens from the adverse effects of the pandemic.
Microfinance institutions in Kenya are yet to recover from the pandemic due to the increase in the number of non-performing loans. This is mainly because many MSMEs experienced great challenges with business cash flows, leading to a decrease in turnover, on average by 40% compared to pre-pandemic levels in 2019.
The German Sparkassenstiftung Eastern Africa (DSIK) and its local partner, the Association of Microfinance Institutions in Kenya (AMFI-K), have intervened through Credit Rotational Funds to support the efforts of the Kenyan Government and other stakeholders to mitigate the negative consequences of the COVID-19 pandemic on MSMEs.
"The objective of the Credit Rotation Fund is to provide low-interest loans to financially sound and compliant institutions of the microfinance sector as additional liquidity to meet the demand for loans by clients during and after the COVID–19 pandemic with the aim of mitigating the negative impacts on their businesses," says AMFI-Kenya CEO Caroline Kabui Karanja.
The first round of funds provided by the German Federal Ministry of Economic Cooperation and Development (BMZ) under co-management of DSIK and AMFI Kenya was successfully disbursed to two microfinance institutions – Sumac Microfinance Bank and Jitegemea Credit Scheme.
"We seek to cushion our clients from the effects of the COVID-19 pandemic in the best way possible, and this fund couldn’t have come at a better time for us," said Sumac Microfinance Bank CEO John Njihia.
Eligible microfinance institutions will have the opportunity to repeatedly apply for loans from the fund, to contribute to the support of economic activities in Kenya especially the establishment and development of MSMEs.
