Across the world, Micro-Small and Medium-Sized Enterprises play a crucial role in being the backbone of the economies. The sector accounts for more than 70 percent of all jobs globally and contributes more than 50 percent of GDP in high-income countries according to the World Bank.
In Kenya, SMEs comprise 98 percent of all registered businesses and they contribute about 24 percent of GDP. Over 8 million Micro, Small and Medium Enterprises (MSMEs) in the country employ more than 15 million people. With its vast potential as a source of employment and equitable development, the MSME sector is a growth engine for the country’s economy and overall progress.
The term micro and small enterprises (MSEs) or micro, small and medium enterprises (MSMEs), is used to refer to SMEs in Kenya and under the Micro and Small Enterprise Act of 2012, micro enterprises have a maximum annual turnover of below KES 1,000,000 and employ less than 10 people. Small enterprises (SMEs) on the other hand, have between Ksh 1,000,000 and 5 million annual turnover and employ 10-49 people.
The sector suffered massive losses amid the outbreak of the COVID-19 pandemic and the subsequent restrictions on the movements worldwide. Women-led MSMEs were especially hard hit, with many reporting losses largely due to their smaller size, informality, and concentration in heavily affected sectors.
While many of the businesses have been on a recovery mode, new challenges, including the Russia-Ukraine conflict and the inflation, are again testing the resilience of the MSMEs. Additional factors that could hinder the growth of the sector include limited access to finance, lack of skilled workforce, and limited access to markets.
In this article we will explore some of the initiatives both financial and non-financial that Absa Bank Kenya has put in place to help the SMEs thrive in the long term and to combat the many converging challenges they’re facing.
Absa Bank Kenya MSME initiatives – Financial
Absa Bank Kenya, for instance has played a pivotal role in extending financial assistance through various customised lending schemes, using advanced technologies for a seamless experience.
Absa Bank has also come up with tailor-made loan products for small businesses, including Wezesha Biashara and the Absa She Account.
Wezesha Biashara Program
The Absa Wezesha Biashara program funds existing businesses to grow as it gives unsecured loans of up to Ksh 10million, up to 95 percent asset financing, LPO and much more. Absa has approached the program holistically by providing both financial and non-financial bits, including capacity building and mentoring.
The program also includes unsecured invoice discounting of up to Ksh 50 million and unsecured bid bonds of up to Ksh10 million.
Absa She Account
The Absa She Business Account is targeted to women in business, particularly those in the Small and Medium Enterprises (SME) segment of the economy. The proposition is built on four key pillars; Access to Finance, Access to Market, Access to Information as well as Access to Mentorship and Coaching.
Under this program unveiled in 2021, women entrepreneurs have access to unsecured lending of up to KES 10 million, payable over 5 years for existing borrowers, and KES 7 million for new borrowers payable in 4 years. A grace period of up to 60 days is granted on a case-by-case basis.
Non-financial benefits for Absa customers
It is not only lending where the SME sector needs support. The MSMEs also need a required push towards innovation and skill development to scale and cater to global markets as well.
Owing to the massive reach and networks across the continent, Absa bank can also guide MSMEs through right collaboration, business protection and knowledge sharing.
The bank has also partnered with various institutions including the International Trade Centre (ITC), Kenya National Chambers of Commerce and Industries, Kenya Association of Manufacturers, Development Finance Institutions, corporate customers, among other institutions, to scale the impact of both financial and non-financial interventions.
Absa Bank has gone beyond financial interventions to provide non-financial support—such as advisory, capability-building, and networking opportunities—to help high-potential SMEs tackle challenges and achieve their goals. Such programs have proved to be an effective way for governments and other interested institutions to assist SMEs.
This is a partner post.