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Kenyan Scholar Urges Credit Bureaus Not to List Struggling Defaulters amid Pandemic

Logo Credit Reference Bureaus (CRB)

As Small and Medium-sized Enterprises (SMEs) strive to recover from the devastating effects of COVID-19 lockdown, which has continued to ravage economies around the world, a scholar at a Catholic-founded Kenya-based university has appealed to Credit Reference Bureaus (CRBs) to stop listing defaulters who are struggling to settle their debts.

According to Sharon Osembo, a lecturer of Development Studies and Philosophy at the Nairobi-based Strathmore University, listing small business owners who have been unable to pay their loans frustrates their efforts to access funding for their businesses.

“Credit Reference Bureaus should not list people who have defaulted. When someone is listed by CRB, they are termed as a high-risk borrower and warn credit providers to be more careful when lending to such people. This affects their ability to access financial services in the future when they are in need of them,” said Ms. Osembo.

Ms. Osembo is one of the five scholars from around Africa who shared their reflections in a report by Harambee Africa International (HAI) dubbed, “COVID-19: Resilience in Sub-Saharan Africa,” which the leadership of the Rome-based organization sent to ACI Africa November 16.

The five interrogated issues around the effects of COVID-19 in their respective countries and attempted to predict the aftermath of the pandemic.

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Sharing her reflection under the topic, “The Fall and Rise of SMEs in Kenya as a Result of the Covid-19 Pandemic”, Ms. Osembo observed that in Kenya, SMEs which provide employment to 80 percent of the population were already disadvantaged due to factors like a poor economy, lack of access to credit and bureaucracy even before COVID-19 struck.

The Kenyan scholar said that the pandemic worsened the challenges that SMEs were already grappling with, leading to job losses, depletion of savings and deaths.

The lockdowns in China, she said, meant a disruption in the supply chain of many global businesses.

“Local and international restriction of movement led to a decrease of customers, as well as customers hoarding money due to an uncertain future,” said Ms. Osembo.

According to the scholar, the Kenyan government has a bigger role to play in providing a conducive business environment especially for the SMEs.

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“The Kenyan government should reconsider debt moratorium and delay payment of debts since many businesses are going through financial hardships,” she said, and added, “Apart from looking for funding for start-ups and growth of the SMEs, the focus should also be on looking for critical factors that will make SMEs in Kenya be competitive nationally and internationally.”

The government, she said, should also strive to strengthen policies that help with the trade flow especially for the various regional trading blocs.

Such policies, Ms. Osembo said in her report, will enable SMEs to identify other African markets where they can source raw materials or sell their products.

According to the Kenyan scholar, COVID-19 had provided a unique boost to entrepreneurs who were now in the business of processing equipment to provide safety against the pandemic.

As a result of the concerns surrounding the spread and transmission of COVID-19, demand for new products such as Protective Personal Equipment (PPEs) and sanitizers had skyrocketed, she said.

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In Kenya, Export Processing Zones companies (EPZs) rose to the occasion to prepare PPEs, masks and sanitizers.

“This is good news for Kenya because the country is tapping into manufacturing potential that was previously underestimated,” said Ms. Osembo.

She hailed the Kenyan government for giving the textile industry a significant boost by tasking industry players to make the PPEs and urged the government to continue investing in the sector to maintain and strengthen its gains.

The other four professionals who share their reflections in the HAI report were Martin Drakard, a journalist working in Kenya, Raoul Kienge-Kienge Intudi from the Democratic Republic of Congo (DRC), Ahouré Alban from Ivory Coast, and Gabriel Dinda from Strathmore University.

HAI provided various talking points to guide the reflections. Will this pandemic shape the future of Africa? And how? Will African governments be able to effectively tackle the global health crisis and its economic and social effects? What are the opportunities that could emerge in the near future? In which areas?

In his reflection titled “Covid-19: A Challenge to Improve Kenyan’s Life”, Martin Drakard, a Journalist in Kenya observed that COVID-19 had created a gap between a few haves and the majority have-nots especially in access to education and technology.

“The fortunate ones continue their education, with online classes… But these are a small minority, with regular access to Wi-Fi and who live in the cities,” said Drakard.

Even then, he added, the online programs have limited effectiveness since they do not seem to allow interactive learning.

The Kenyan-based journalist highlighted vices that were reported among school children including teenage pregnancies, substance abuse and child labor, which he blamed on the COVID-19 lockdown.

“In less urbanized areas of the country, and in the big urban slums where there are fewer amenities and less access to technology, but where a child at home means an extra hand, as well as an extra mouth to feed, some children have turned to hawking goods, fishing, driving boda-boda, even mining in western Kenya,” he said, highlighting some of the activities that learners are engaging in as they stay away from school.

“It is quite possible that many of these children will not go back to school once learning is resumed,” the journalist said, and added, “It is also likely that many community or private schools in poor areas will not re-open, having lost one year’s income.”

Drakard further said that in the remote areas, where schools are left unguarded, there have been instances of looting and vandalism, and that the food being stored for the first term has been stolen or left to rot.

Classrooms in many parts of the East African country have been converted to shelters for squatters and cattle.

The HAI report, shared with ACI Africa November 16, is the fourth the organization has done “in recent years,” according to the association’s Vice President, Manuel Sanchez.

The association aims at promoting “in-depth discussions on development in Africa, contributing to the spread of correct information on the continent and with the ambition to try new ways of expressing the culture of human development, the ambition to go beyond the current models,” Sanchez told ACI Africa in a November 2019 report.

In the November 16 report, Sanchez told ACI Africa that although the numbers of the new COVID-19 infection were still lenient in Sub-Saharan Africa, the economic and social consequences of measures to stop the spread of the virus seem dramatic.

However, according to Sanchez, “It is precisely at a time of increased vulnerability that resilience processes are being set in motion to resist and react to the crisis, transforming it, if possible, into opportunities for growth.”

He added, “And this is the theme on which the reflections collected by Harambee investigate, thanks to the contribution of several authoritative representatives of the academic and institutional world in DR Congo, Kenya, Ivory Coast.”