Microfinance holds the key to unlocking the potential of the Small and Micro Enterprises sector to contribute to Kenya’s economic development and alleviate poverty, a top bank official said.

Mrs Winnie Kathurima, the Change and Corporate Affairs Director of Equity Bank, said SMEs should be well funded in order to contribute effectively to economic growth. “Microfinance is our anchor for economic growth,” said Mrs Kathurima. “It could revolutionise Kenya’s transformation to a developed country status.”

Kenya passed a Microfinance Act late last year, which provides a legal framework for regulating microfinance institutions (MFIs), which lend to micro-entrepreneurs.

“We now have a clear policy that would enable majority of Kenyans enter into the economic arena,” said Mrs. Kathurima, who is also the Chief Executive of the sustainable social responsibility programme at the bank, which won the 2007 Global Vision Award on Microfinance alongside 2006 Nobel Peace laureate Bangladeshi economist Prof Muhammad Yunus.

Micro-finance would ensure existing businesses strengthen while enabling new ones to sprout, she said.

Microfinance hit the headlines last year when Yunus and his Grameen Bank won the Nobel Peace Prize for their grassroots drive to end world poverty through microlending.

Equity Bank, which also won an international award in 2005 for its role in providing loans to micro-entrepreneurs, has entered into a joint partnership with the United Nations Development Programme (UNDP) to promote Kenyan women in business and investment.

The Sh 5 billion programme, which targets 2000 start-ups and existing women businesses, seeks to tap the potential of Kenyan women to create globally competitive businesses and participate actively in decision making processes at economic, social and political levels.

The UN will provide technical and advisory services while the bank will give the necessary entrepreneurship training and financial support.

Mrs Kathurima denied claims the beneficiaries were elite women, saying those successful were selected from the bank’s list of potential and existing customers.

“We have set aside Sh 2 billion for start-ups,” she said.

Seven out of every 20 Kenyan bank account holders bank with Equity.

While the programme targets enterprises that are potentially competitive globally, the UN already supports micro, small and medium enterprises (MSMEs) through the ministries of Youth; and Trade and Industry and has established district business solution centres in nine Millenium Districts, including Bondo, Bungoma, Garisssa and Kilifi.

Others are Meru South, Muranga, Siaya, Suba and Turkana.

Thanks to microfinance, Mrs Kathurima said loans were available to prospective businesspeople, especially women, who could not afford to put up the conventional collateral.

“We have products that are based on trust like a recommendation by the local chief or church leader,” she said.

This article was first published on BDAfrica.com and is republished here with permission.