Diamond Trust Bank now establishes unit for microfinance

Diamond Trust Bank Chairman Abdul Samji (right) and the Chief Executive Officer Nasim Devji during the Bank’s Annual General Meeting held at KICC in Nairobi on May 31, 2013. PHOTO/SALATON NJAU   NATION

By NATION CORRESPONDENT
 

 

In Summary

• The Micro Small and Medium Enterprises Act that was signed into law in December 2012 categorises micro enterprises as those businesses with an annual turnover of not more than Sh500,000 and that employ less than 10 people.

Mid-tier lender, Diamond Trust Bank, has established a unit targeting microfinance and individual borrowers.

The bank’s managing director Nasim Devji said many lenders have for long shied away from extending credit to very small enterprises (VSE) slowing growth in this sector that employs over 8.5 million Kenyans.

“This is one of the segments that has not received a lot of attention since a lot of banks tend to focus on the small and medium enterprises. Then there are the very small enterprises which are currently not well looked after,” Ms Devji said yesterday during the bank’s Annual General Meeting.

She said the microfinance unit has been set up within the bank to specifically begin courting the micro-businesses, with the long term target of supporting them to become small and medium enterprises that many commercial banks have zeroed in on.

The Micro Small and Medium Enterprises Act that was signed into law in December 2012 categorises micro enterprises as those businesses with an annual turnover of not more than Sh500,000 and that employ less than 10 people.

The law is now seen as a weapon to streamline this sector by requiring entrepreneurs to cultivate the culture of record-keeping and formalisation of their operations. It is expected this will open the way for a scramble of the sector by commercial banks that have for long considered them a high risk group.

“We believe this is a group that is often unable to access financial services. We want to be in a position to help them access financial services,” Ms Devji further said adding that the World Bank’s investment arm, the International Finance Corporation (IFC) will provide 50 per cent guarantee to credit extended to these businesses.