The National Institute of Credit Administration (NICA) has raised concerns about the detrimental effects of high-interest-rate loans on the viability of Small and Medium Enterprises (SMEs) across the country.
This was contained in a statement by the Chief Executive Officer (CEO), Prof Chris Onalo on Wednesday, March 13.
The statement noted the need for more accessible loans with lower interest rates and flexible repayment terms to enhance the profitability and sustainability of SMEs.
According to NICA, the key to fostering a robust environment for the growth and expansion of SMEs lies in the provision of business-friendly loans.
“Such financial products would encourage new and existing business owners to embark on entrepreneurial ventures and facilitate the expansion of established enterprises,” the statement said.
The institute stated that the comparative advantage businesses enjoyed in advanced economies is attributed to the availability of low-interest rate loans, often in the single digits.
NICA further said: “It is difficult for businesses to break even with high-interest rate loans because the SMEs have other high operating costs which will make repayment a challenge to them.
“To be better competitors and be empowered to expand their trades, businesses should have access to single-digit interest rate loans with flexible repayment options. This is the ideal situation that will boost a business-friendly environment.”
