Kenya's central bank says small businesses need urgent help

The Governor of the Central Bank of Kenya, Patrick Njoroge hosts a virtual press conference on Thursday following a Monetary Policy Committee Meeting. /PHOTO Courtesy: Central Bank of Kenya - Twitter

Kenya’s small and medium enterprises need urgent financial aid to cushion them from the biting effects of the COVID-19 pandemic, the head of the central bank said on Thursday, warning that those businesses risk shutting down by end June.

The Central Bank of Kenya (CBK) said on Wednesday that the businesses were expected o take advantage of credit available to them once a planned credit-guarantee scheme was in place.

"I wanted to underscore the urgency of... putting in place the credit guarantee scheme," CBK Governor Patrick Njoroge told a virtual news conference. "This is extremely urgent. We cannot do this as business as usual."

The CBK in March reduced the amount of cash that banks are required to set aside, releasing 35.2 billion shillings for lending. Bank loans worth 273 billion shillings have also been restructured due to coronavirus-related hardships.

The bank's monetary policy committee has also cut its main interest rate by a total of 125 basis points over two meetings to support the economy. On Wednesday, it left its benchmark rate at 7.0%, saying that its accommodative stance remained appropriate.

In early May, the International Monetary Fund's executive board approved $739 million in emergency financing to help Kenya respond to the pandemic.

Citing a study in April, Njoroge said 75% of businesses surveyed had said without help they would close by the end of June because they lacked credit buffers and other resources to survive the slowdown.

Njoroge said details of the credit guarantee scheme were still being worked on. Last month, he said it could be around 100 billion shillings ($935.89 million).

Kenya has so far reported 1,618 COVID-19 infections and 58 deaths. In a briefing on Thursday, the Health Cabinet Secretary Mutahi Kagwe announced the highest single-day increase in infections, with 147 new cases registered.

In a bid to curb further spread of COVID-19, Kenya has suspended commercial flights in and out of the country, suspended gatherings including schools and churches and imposed a nationwide dust-to-dawn curfew.

Source(s): Reuters