Tuesday, July 27, 2010

World Bank Teams Up With Companies to Fund Small Businesses - Kenya

The World Bank has stopped dealing directly with individual businesses, preferring to work with organisations that transact business with firms.
The change of strategy is informed by the need to reach more SMEs which are engaged by established firms as vendors, distributors and sales agents.

"We have changed our engagement strategy with SMEs to ensure that we reach more and enhance their linkage with established firms to not only drive their top lines but ensure they enjoy wholesome benefits such as savings and proper management of their businesses," said Nkatha Michira, the operations officer for the International Finance Corporation (IFC) SME Solutions Centre.

The IFC Small and Medium Enterprises centre was established to provide technical and financial assistance to the budding SME sector which has been struggling to access affordable financial services.

According to Ms Nkatha, the move is expected to provide additional services to the SMEs.

The new programme, which will drive IFC engagement with the SMEs sector for the next three years, was successfully tested in the Middle East and North Africa.

In its new Value Chain strategy, IFC SME Centre has partnered locally with East African Breweries Limited (EABL) and the Nation Media Group to enhance the distribution and financial capability of their respective distributors and sales teams.

IFC has also partnered with Standard Chartered Bank for its SMEs clients.

Plans are under way to engage more companies that deal with small firms to roll out the programme.

Ms Nkatha reckons that by partnering with these two organisations, the programme has managed to reach a wide number of SMEs players which would not have been possible in the initial programme.

"We had difficulties reaching a critical number of small firms which now is possible as we partner with organisations that deal with SMEs by bringing them on board," said Ms Nkatha.

In the case of the EABl, the programme enables distributors to ensure proper management of records, stock flow and cash management.

Similarly, the ongoing programme targeting Nation Media Group distributors is expected to enhance capacity, ensure proper management of stock and cash flow and inculcate a culture of savings.

Financial institutions

The programme provides direct linkage between the SMEs players and financial institutions to ease access to financial services.

For instance, the programme targeting the Nation Media distributors has incorporated the Nation SACCO to provide a financial platform for the distributors and sales agents to access financial services such as savings schemes and credit facilities.

Most SMEs cite poor access to financial services, especially credit facilities, as a major hurdle to growth.

Financial institutions are known to demand collateral and other securities before providing credit lines. Majority of SMEs are unable to provide such collateral as their resources are channelled toward running the business and not acquisition of capital assets.

The IFC SME Centre is also running other programmes such as the women focused empowerment programme dubbed Growth Opportunity for Women Empowerment (GOWE) and the Trade Scheme that provides trade guarantee schemes with financial institutions.

Other programmes are Lighting Africa, an initiative that is focusing on providing green energy solutions such as Solar and Wind energy to households and the SME Business Tool Kit that provides entrepreneurs with a wide range of easy to use management tools for their operations.

IFC SME Centre has also partnered with risk capital funds such as Grofin and Business Partners International (BPI) to provide credit lines to SMEs.

This partnership allows IFC to provide funds to the risk capital funds for inward lending to the SMEs on lesser stringent terms than commercial banks.

To track the progress of the new programme, Ms Nkatha notes that there are deliverables benchmarked at each stage of progress.

"We have deliverables that will allow us to carry out evaluation and monitoring for a feedback on the effectiveness of the new programme".

African News Online - Business News

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