State-backed lending to small-sized factories has dropped for the first time in many years, signalling reduced funding to peri-urban and rural industrial projects under President Uhuru Kenyatta’s Big Four agenda.
Kenya Industrial Estates (KIE), the State-run development financier, advanced Sh982.3 million to small-scale factories largely in manufacturing and agro-processing sub-sectors for the year ended June 2021, a 19.64 percent drop from a record Sh1.22 billion the year before.
That marked the first time in recent years that industrial loans under KIE — which focuses on rural industrialisation have fallen, according to data from the Industrialisation and Trade ministry.
Leather, textiles and agro-processing sub-sectors were seen as low-lying fruits to jumpstart Mr Kenyatta’s plan to revive and modernise cottage industries under the manufacturing pillar of the Big Four agenda.
The ministry, however, says the KIE funding — largely for the purchase of machinery and bolstering working capital — marginally surpassed Sh960 million.
“KIE was involved in the Post-Covid Economic Recovery Programme and instituted support measures to MSMEs (micro-, small- and medium-sized enterprises) severely affected by the Covid-19 pandemic,” the ministry wrote in its scorecard report for three years through June 2021, which will inform fresh budgetary allocation for the upcoming year from July.
The funding helped create 1,964 new enterprises in the year ended June 2021, beating its goal of 1,920 businesses but falling below 2,443 firms that benefited the year before.
The report further states that financial support to “MSMEs severely affected by the Covid-19 pandemic” helped create 29,470 jobs in the year, a 20.97 percent drop compared with 37,290 job openings the previous year.
The parastatal also linked 3,968 small firms “to technology, markets, machinery and source of raw materials” in the 12-month period through June 2021 compared with 3,683 firms a year earlier.
The development financier, set up in 1967 to fund indigenous entrepreneurs, usually offers credit of between Sh100,000 and Sh20 million for an annual interest of 10 percent, repayable in eight years with a grace period of up to 12 months.
KIE has in the past struggled to recover loans with a debt recovery rate of less than 10 percent, according to past reports by the Office of Auditor-General.
cmunda@ke.nationmedia.com
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