The National Treasury intends to increase the fund eightfold—from Ksh3 billion to over Ksh25 billion, with the goal of unlocking up to Ksh50 billion in commercial bank lending for more than 200,000 MSMEs.
The scheme works by partially guaranteeing loans issued by banks, reducing the risk banks face when lending to small businesses that lack traditional collateral. This allows banks to offer lower interest rates and better terms.
Why This Matters
Banks often avoid MSMEs or charge very high interest due to risk
Many businesses have viable ideas but no collateral
The guarantee absorbs part of the default risk, encouraging lending
Despite being launched in December 2020, uptake has been slow, with only Ksh6.2 billion disbursed so far, prompting the government to scale it up aggressively.
Hustler Fund Expansion
The Credit Guarantee Scheme will complement the Hustler Fund, a digital lending platform launched in November 2022.
Government plans include:
Scaling the Hustler Fund to Ksh100 billion
Reaching 30 million Kenyans
Targeting informal workers, traders, and small entrepreneurs excluded from formal banking
This aligns with President William Ruto’s Bottom-Up Economic Transformation Agenda (BETA).
Role of the Central Bank & Private Sector
The Central Bank of Kenya (CBK) is laying groundwork for private credit guarantee companies by issuing draft regulations.
Key requirements for these firms:
Minimum capital of Ksh1 billion
Capital adequacy ratios similar to commercial banks
Ability to insure portions of banks’ loan portfolios for a fee
This creates multiple financing pathways beyond government-backed schemes.
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