SME Trade Finance: Review of facilities available in - FSD Kenya

42 • SME TRADE FINANCE – REVIEW OF FACILITIES AVAILABLE IN KENYA
5. TERMS OF REFERENCE OF THE CONSULTANCY
1. BACKGROUND
The Private Sector Development Strategy Implementation Plan is a five year
framework designed and agreed between major donors and the Kenyan
Government. The aim is to create an enabling environment for the growth
of a dynamic private sector that can sustainably contribute to real poverty
reduction in the country.
The PIP is being coordinated by a secretariat housed at the Ministry of Trade
and Industry. FSD Kenya is one of the key implementation partners for the PIP,
regarding elements relating to access to finance under goal #5 (Support for
entrepreneurship and MSE development).
GrowthFin, a programme of FSD Kenya, is designed to catalyse the growth
of small and medium sized businesses. It does this by expanding access to
financial products and services.
GrowthFin seeks to build capacity in SME risk assessment and management,
as well as support the development of financial products and services suited
to the SME market. GrowthFin works with policy makers, donors, industry
associations and financial institutions to identify and overcome impediments
to the provision of financial services to SMEs.
One area of concern, highlighted in the PIP, is SME access to international trade
finance. With more Kenyan SMEs becoming involved in international trade, the
availability of appropriate trade finance will be increasingly important. There
are some grounds for optimism.
The financial sector in Kenya has in recent years begun to focus on the small
and medium end of the market as a potentially profitable segment. Along
with this attention, there have been some attempts to develop an appropriate
product range containing products related to international trade.
It is currently uncertain whether this will meet demand, or whether there may
be both a need and opportunity for GrowthFin or others to support initiatives
in this area. The first step is therefore to document the existing availability of
trade finance in Kenya and the constraints to access to this by SMEs.
In determining whether SMEs currently or potentially involved in
international trade are able to access appropriate trade finance facilities,
the following issues need to be considered:
The current use of trade finance facilities by SMEs, to include gaps in
product availability;
The constraints to access by this market segment, including cost and
collateral requirements; and
Options for improving access (overcoming constraints).
With this information, GrowthFin and potential partners can put together a
workable plan or intervention to comprehensively address the issue.
2. OBJECTIVES
The objective of the assignment is to review the SME trade finance market in
Kenya and to provide concrete recommendations to strengthen the provision
of trade finance to SMEs.
3. SCOPE OF WORK
The consultant(s) will examine the state of trade finance in Kenya within the
payment risk profile of international trade presented below.
Least
Secure
Open Account
Cash-in-Advance
Documentary
Collections
Letters of Credit
Exporter
Importer
Letters of Credit
Documentary
Collections
Cash-in-Advance
Open Account
Most
Secure
Source: U.S. Department of Commerce, International Trade Administration, Trade Finance Guide, April 2007
The consultant(s) shall examine the availability and scope of (but not be
limited to) the following;
Payment systems (wire transfer, cheque, credit card, etc.)
Letters of Credit (irrevocable, confirmed, other forms)
Documentary collections (against payment, against acceptance)
Export working capital financing
Government/Donor guarantees
Export Credit insurance
Export Factoring
Forfeiting
The consultant(s) shall carry out (but not be limited to) the following
activities;