Kenya's Business Environment: A Rigged Game Against Genuine SMEs And Entrepreneurs

Kenya’s Business Environment: A Rigged Game Against Genuine SMEs And Entrepreneurs

By Steve Biko Wafula / Published August 29, 2024 | 10:35 am

Kenya’s economy is currently rigged in favor of a select few, making it nearly impossible for small and medium-sized enterprises (SMEs) and entrepreneurs to thrive. At the heart of this issue lies the financial sector, specifically the banks, which appear to be the only entities consistently reporting profits. Meanwhile, the small businesses that form the backbone of the Kenyan economy struggle to keep their doors open.

In a bad economy, one might expect financial institutions to tighten their belts and work alongside the struggling businesses and individuals who rely on them. However, in Kenya, the opposite is happening. Banks are reaping massive profits, not by supporting the local economy, but by giving huge loans to a broke government in return for exorbitant interest rates. These profits are not a sign of economic health but rather an indictment of a financial system that is rigged against ordinary Kenyans.

For the average citizen or small business owner, accessing a loan is a frustrating and often futile endeavor. Banks create unnecessary barriers that make it nearly impossible to secure financing, even though the money they lend is largely derived from the deposits of ordinary citizens. It’s not uncommon for a bank to deny a loan based on trivial issues, such as the failure to file a tax return from several years ago. Yet, the same banks have no qualms about lending billions to a government that has repeatedly misused public funds.

Consider this scenario: a small business owner approaches their bank to apply for a KES 100,000 loan to expand their operations. Despite having a good cash flow, the bank denies the application, citing a minor issue like a small, unpaid mobile loan that has resulted in a listing with the Credit Reference Bureau (CRB). On the other hand, these same banks are more than willing to extend massive loans to a government that has borrowed KES 5.3 trillion since 2014, with little to show for it.

The question that begs to be asked is how banks can continue to report such staggering profits in an economy where their customers are barely making ends meet. The answer lies in the fact that these profits are not derived from supporting the local economy but from exploiting it. For instance, COOP made KES 18 billion and KCB boasted KES 29 billion. Even smaller players like Family Bank managed to post a significant profit of KES 1.6 billion.

These profits are not just excessive; they are immoral, given the economic reality in Kenya today. Banks are making money off the backs of struggling citizens and businesses, while refusing to offer the support that could help lift the economy. They are essentially using the money deposited by ordinary Kenyans to do business with a government that has shown time and again that it cannot be trusted with public funds.

Even more troubling is how these profits are being used. Rather than reinvesting in the community or improving services for customers, banks are underpaying their staff, neglecting basic facilities like customer toilets, and failing to maintain their premises. The bulk of these profits end up in the pockets of a few crooked directors, with only meager dividends offered to shareholders as a token gesture.

The current business environment in Kenya is grossly unfair to SMEs and entrepreneurs. These small businesses are the lifeblood of the economy, yet they are being suffocated by a financial system that is more interested in serving the interests of a corrupt and inefficient government than in fostering local economic growth.

The path forward requires a fundamental shift in how banks operate and their role in the economy. Banks must be held accountable for their actions and urged to support SMEs and entrepreneurs instead of contributing to their demise. It is high time that financial institutions align themselves with the citizens they are supposed to serve, advocating for financial policies that are fair and inclusive.

Kenyan banks must decide whether they want to continue profiting from a broken system or become part of the solution. They have the power to stimulate economic growth by offering fair loans to businesses that can drive innovation and employment. However, if they choose to maintain the status quo, they risk losing the trust and confidence of the Kenyan people.

SMEs and entrepreneurs need a level playing field to succeed. They require access to affordable credit, transparent banking practices, and a financial system that prioritizes their growth and sustainability over short-term profits. If banks fail to change their ways, the long-term consequences for the Kenyan economy could be dire.

Ultimately, the choice is clear: banks can either stand with the Kenyan people in building a fair and prosperous economy, or they can continue to exploit a rigged system at the expense of the very citizens they claim to serve. The time for change is now, and the stakes have never been higher.

About Steve Biko Wafula

Steve Biko is the CEO OF Soko Directory and the founder of Hidalgo Group of Companies. Steve is currently developing his career in law, finance, entrepreneurship and digital consultancy; and has been implementing consultancy assignments for client organizations comprising of trainings besides capacity building in entrepreneurial matters.He can be reached on: +254 20 510 1124 or Email: info@sokodirectory.com

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