Micro-lenders urged to widen their nets for new opportunities
Microfinance institutions (MFIs) have been urged to extend their nets as wide as possible if they are to take advantage of the new opportunities arising from asset-based lending options.
Since some banks, the reduction in loans to small and medium-sized enterprises (SMEs) because of their risk aversion – a multitude of other providers, including digital lenders, have emerged to meet their debt financing needs.
And as a result, opportunities in micro-leasing, for example, now appear as a potential for MFIs keen to increase their income, especially during this pandemic period, according to senior financial expert and banker Peter Macharia.
“There are currently several opportunities in asset leasing, especially in machinery, office equipment and inventory, areas in which most banks have not yet fully capitalized, but which at the same time offer opportunities to MFIs, ”said Macharia, who is also the managing director. of Jijenge Credit Limited.
Micro-leasing is a contractual arrangement between two parties, which allows one party (the lessee) to use an asset owned by the other (the lessor) in exchange for specified periodic payments – the concept is rapidly gaining popularity among SMEs eager to quickly secure loans from flexible micro-lenders.
These alternatives, according to Macharia, make a welcome contribution to financing growth companies for SME search for extension options.
“It is one of the fastest growing sources of debt financing and probably still the best route for companies who are currently looking for a very affordable and flexible option, which also allows them to secure significant funds for the business. growth and expansion, ”Macharia said.
Growth companies, according to the CEO of Jijenge Credit, have never had so many choices in terms of financing or investment options to grow.
A variety of attractive alternative financing options have emerged in recent years, such as state-backed SME debt funds like the UWEZO fund, the Youth Fund, among others, as well as those who have pulled started with technological advances such as crowdfunding and peer-to-peer lending platforms.
Macharia says this is where alternative debt options have filled the void – conventional traditional banks and technological alternatives such as digital lenders like Zenka and Tala, among others, now all offer SMEs solutions for their debt needs. growth, without having to give up equity capital or accept tough conditions from financial institutions.
“When you rent, the money isn’t tied up in the equipment. Instead, the money is available for opportunities such as marketing, working capital, investing, or seasonal cash flow needs. You save 30% in corporation tax through leasing, which gives you great peace of mind to focus on the core business of your organization, ”he says.
Normally, according to contract law, the lessor will be responsible if the rented equipment is lost, stolen or damaged, but the renter must ensure that the equipment has the most complete insurance and any money not paid by the insurance. will be payable by the person renting the equipment.
The trend according to Macharia is expected to continue as most Kenyans continue to borrow to maintain their businesses – most of whom have been hit by the coronavirus pandemic.
“With rental opportunities in areas such as real estate, vehicles, websites, stationery, among others, I can only foresee a growing trend in the future,” says Macharia, whose core business of the business is the financing of motor vehicles and assets.