Informal Lenders Still Dominate Kenya's SME Credit Market

The main reason why informal lenders, such as suppliers and shylocks, are still the top credit providers for SMEs in Kenya is because of the high cost of credit from formal lenders.

According to a survey by the Financial Sector Deepening Kenya (FSD Kenya) and the Financial Access Initiative (FAI), 49 percent of SMEs found that high-interest rates and strict repayment timelines prevent them from accessing credit from banks.

In addition, many SMEs do not have the collateral or paperwork required to qualify for a loan from a bank. As a result, they are forced to turn to informal lenders, who often charge much higher interest rates.

Resources:

1. https://www.businessdailyafrica.com/bd/economy/why-suppliers-shylocks-are-still-top-credit-providers-smes--4243386

2. https://www.fsdkenya.org/blogs-publications/a-new-perspective-on-small-firms-in-kenya-summary-of-key-findings-from-the-small-firm-diaries/