The Treasury will cover up to 25 per cent of the loan in the event of default in the pilot phase, which was in June allocated Sh3 billion, with the lenders shouldering the remainder of the loss.
The allocation to the guarantee fund will rise to Sh10 billion in the financial year starting July 2021 following approval by the Cabinet in September.
The Treasury plans to help set up a private sector-led company to de-risk lending to credit-starved small traders after the successful launch of a similar firm for homeowners.
The planned entity, which will take a similar approach as the Kenya Mortgage Refinance Company for home loans, targets to partially cover Sh100 billion in loans extended to cash-strapped micro-, small- and medium-sized enterprises (MSMEs).
