US organisation comes to the aid of small traders

from Business Day Africa

Written by Geoffrey Irungu and Beatrice Gachenge

A Washington-based firm has come to the rescue of small traders as it emerged that micro finance institutions (MFIs) are in the process of formulating a rescue plan for the traders affected by political violence.

MFIs revealed yesterday they may have lost between Sh3.75 billion and Sh10 billion, or 15 to 40 per cent of the value of the loans repayments put at Sh25 billion which have become doubtful.

Micro-Credit Summit (MCS), a US organisation, wrote a letter as early as January 4, this year, asking for donations around the world to help the Kenyan MFIs to ride through the crisis by appealing for funds from others. However, it was not yet clear how much it had raised for the purpose since then.

MCS is a programme of Small Enterprise Education and Promotion (SEEP), which has members in 67 countries around the world. USAid is one of the largest financiers.

The letter – which has already been put in the Internet read: “The Microcredit Summit Campaign is soliciting contributions to a Kenya Crisis Recovery Fund in partnership with the Association of Microfinance Institutions (AMFI), the umbrella organisation of microfinance institutions (MFIs) in Kenya.

AMFI will ensure that donations will be distributed among the MFIs whose clients have been most affected so that relief is provided and people are able to rebuild their businesses and homes.”

The organisation drew attention of the donors to the riots that had erupted in Kenya following the elections. “As is often the case, the poor are the most affected by the crisis. Many microfinance clients have seen their businesses and homes extensively damaged or destroyed in the rioting,” the letter said.

The chair of AMFI, Ms Ann Mutahi, said yesterday they expected the funds to help lift many of those who had loans .

One of the proposals in the AMFI’s plan is to have top-up finance as well as grants for the micro-enterprises that would attempt to put them back where they were before the political disturbances.

Faulu Kenya chief executive Lydia Koros said the full extent of the damage to the microenterprises was not yet known but noted that it will be necessary to do some write off loans owed by some of the most affected businesses. Ms Koros said some of their clients in Kibera had problems accessing fish for sale because there was insufficient transport from the lake region to Nairobi.

She said the most affected small businesses in Nairobi were in Huruma, Mathare and Kibera, adding that it was not only necessary to rebuild the businesses but also help their clients who had lost their homes to get shelter.

The CEO of Corporate Insurance Company Nelson Kuria said there were no issues of “small print” hampering compensation for business losses.

The Association of Kenya Insurers has left it to individual underwriters to determine whether or not claims arising from the violence are payable.
Mr Kuria said he had received a single claim amounting to Sh55 million from a client.

“The big problem we are facing is that we don’t have anyone to document the claim. The clients have run away from areas hit by violence,” he said.

Ms Mutahi said the lenders had agreed to come up with products that will help small business to recover from the destruction they had suffered during three weeks of violence following the announcement of presidential election results on December 30.“SMEs are the backbone of this economy and must be helped to recover,” Ms Mutahi said.

David Ruchu, the executive director of Kenya Agency for the Development of Enterprise and Technology, (Kadet) said the micro lender was reviewing its business strategy to bring it in line with the enhanced risk.

“We have lost more than Sh350 million since the violence erupted,” he said.

Besides the rise in lending risk, the industry is also grappling with the impact of ethnic differences that followed the swearing in of President Kibaki for a second term in office.

“Most of our clients meet in their usual entrepreneurial groups due to the bitterness among members,” said Ms Pauline Ngari, the general manager of Kenya Women Finance Trust (KWFT). “The way forward is to deal with the psycho-social status of our clients and members of staff to build trust and confidence in them,” she said.