HUSTLE MAG MARCH 2020 FINAL

results as entrepreneurs are still finding it
hard to access loans from banks.
Interest rate cap led to a shortage of
funds just as price caps lead to shortage
of sugar and other essential commodities,
says X.N Iraki, an economics lecturer at
the University of Nairobi.
A new study conducted by Strathmore
University and Invest in Africa shows that
the rate caps have had a negative impact.
One of the many enterprise that were
negatively affected by the rate cap is Agri
Mech Africa, a start-up that is setting up
mechanization hubs across the country.
Kenya has over time faced problems
attaining food security, and Agri Mech
Africa provides a solution in the form of
two-wheeled tractors to help farmers in
far-flung rural areas to access affordable
farming equipment.
But to achieve its sole goal of making
farmers more productive, the small startup
needs funds to the tune of Kshs50 million
to reach a bigger number of farmers.
While Agri Mech Africa has the capacity
to turn the tide for millions of small holder
farmers in Africa, scaling it to sustainable
levels is a daunting task for Pascal
Kaumbutho, the founder.
The agricultural engineer runs the
ambitious outfit, which made a net loss of
Kshs2 million in its first year of operation.
“It is now harder to get credit from
The capping of
interest rates
presented
an excellent
opportunity for local
small and medium
enterprises to access
affordable credit
from banks
banks than it was a few years ago,” says
Kaumbutho. He echoes the frustrations
of many other entrepreneurs across the
country.
Kenya is an important place for entrepreneurship,
says Vineet Rai.
To bail out small entrepreneurs, something
needs to be done to bridge the gap
between them and credit.
This explains why firms like Aavishkaar
Intellecap Group is trying new kind
of initiatives in emerging technologies,
entrepreneurship skills and success to
create a real impact on the ground.
There is a very steep investment needed
to see early stage start-ups grow, Mr.
Rai observes. His firm has over 16 years
of experience investing in early stage
start-ups.
The venture capitalist is building an
entrepreneurship ecosystem in East Africa
with an aim of accelerating the growth of
start-ups.
The microfinance subsector has
emerged as a panacea to the challenges
facing micro and small entrepreneurs.
Because of their risk appetite, they traverse
the nooks and crannies of Kenya,
finding businesses and turning them into
success stories. Once they’ve been bailed
out, theres’s a huge likelihood of such enterprises
thriving, creating jobs for more
Kenyans. Getting credit sounds easy until
you knock on the doors of mainstream
financial institutions. Eric Kiio, a Nairobi
based entrepreneur tried to get funding
to deliver a contract he had secured, but
few banks were willing to listen to him.
The few that did demanded for collateral
in the form of title deeds and car logbooks,
assets that he didn’t have.
Microfinance institutions were his
solution. Within a few days, he had money
in his account and was on his way to delivering
his contract.
Charles Njoroge, the Managing Director
of Jawabu Biashara, a credit only microfinance
institution says that there are lots
of lenders in this industry, but only few of
them lend responsibly. His company has
a two pronged approach to responsible
lending; use of field loan officers and
use of technology to design and deliver
financial services. So far, his model is a
success. He notes that when enterprenuers
appropriate the loans they get to grow
their businesses, default payments will be
unheard of. All in all, responsible lending
seems to be key that will unlock the oasis
to quench the financial thirst of small and
micro enterprises.
HUSTLE EAST AFRICA
19