Central Bank of Kenya Boss Dr Patrick Njoroge made a shocking revelation about what will become of Small and Medium Entreprises if COVID-19 persists. According to the CBK Governor, 75 per cent of all small and medium enterprises (SMEs) are likely to collapse by the end of June as the economy is biting hard by the COVID-19 pandemic.
An April survey by McKinsey and Company highlighted a harsh reality of the aftermath of COVID-19 whose ripple effect will send waves of distress across households and likely to last for years. For SMEs, in a months time, when Kenya will probably be at the height of the virus, they will be rethinking their decisions into entrepreneurship.
However, these SMEs can be saved from the verge of collapsing if the government moves in swiftly with a long term solution. Governor Njoroge advises that the establishment of the much-awaited SME credit guarantee scheme to salvage the businesses among other mitigation strategies along the way will protect SMEs.
“Three-quarters of SMEs are on the ropes and would be gone as they do not have any cash to keep the lights on, pay for supplies and compensate workers. The urgency to SMEs is clear to us and we understand it as we have a pulse on that part of the economy. If we don’t have a scheme urgently, the matter will only get worse,” he noted.
Without SMEs, the country will be staring at an economic depression and the GDP will be adversely affected. The government has been working on a National Treasury credit guarantee scheme to cover SME risks and further credit expansion towards the sector. Last week it dedicated a Ksh3 billion as seed capital for the scheme as part of the Covid-19 stimulus ahead of its official launch.
Dr Njoroge argues that the interventions should not be limited to credit extension but other risks that could potentially topple of a business.