Financial transparency and adoption of internationally accepted standards of management are key for SMEs looking to access affordable credit in a market that often places a high risk premium on small borrowers.
Speaking at a Business Daily and KPMG Top 100 companies competition forum in Thika on Friday, past participants that they have seen their cost of credit come down by nearly half after subjecting themselves to the rigorous participation process, which ensures that internationally accepted processes and systems of financial management are in place.
Patrick Wainaina, CEO of 2011 Top 100 winner Jungle Macs, said that the audits and certification process involved in Top 100 have helped when negotiating with financiers, as well as suppliers who are more willing offer more trade credit.
“Since we won the competition we have seen the interest we are charged come down, paying eight per cent when others are charged 16 per cent. We were subsequently even able to ask for and get dollar loans from financiers,” said Mr Wainaina.
Lack of access to sufficient and affordable credit has always been cited as the key challenge for SMEs, with banks demanding high interest payments to cover the risk that new start-ups carry.
This forces entrepreneurs to rely on self-financing, high cost short term finance or borrowing from friends or relatives.
KPMG director for strategy, performance and markets Jane Mugo also pointed out the importance of transparency in tax matters, saying that SMEs which cut corners have a ceiling on how much they can grow.
“We encourage companies to just get it right. If you are positioning yourself to grow, you need to put structures in place early enough because if you do not do it will catch up with you,” said Ms Mugo.
This year’s survey of Kenya’s fastest-growing medium-sized enterprises will conclude on Friday, with the winner being announced at a gala event to be held in Nairobi next month.
The Top 100 competition focuses on SMEs that have audited results for the last three years, are not listed at the stock exchange and have an annual turnover of between Sh70 million and Sh1 billion. Real estate firm Optiven emerged top out of 258 companies that participated in 2014.