Report: SMEs worst hit by debt crisis

A recently released Financial Sector Deepening (FSD) survey, which has the backing of the Central Bank of Kenya (CBK), has revealed that Small and Medium Enterprises (SMEs) are the worst-hit by debt crisis.

The survey revealed that one in every six small scale business borrowers has defaulted on a loan in the past eleven months.

It  further revealed  that majority of the small businesses are living in a debt cycle and that with the persistent harsh economic conditions, these businesses tend to either repay their loans late, pay less amount than expected or totally miss a payment.

The report also revealed that several businesses are struggling to stay afloat due to failure by the national and county governments as well as private sector customers to settle their dues.

SMEs form the bedrock of the country’s economy as they constitute 98 per cent of businesses in the country and have an annual job creation of 30 per cent of all new jobs.

Data from CBK paints a picture of traders taking loans they are unable to service, with the rate of default being high among female owned businesses.

The share of loan defaults increased to Ksh577 billion as of June this year, pointing to cash crunch in the economy that could set up thousands of borrowers for property seizures.

By Thuita Jaswant

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