Banks urged to support SMEs facing loan repayment challenges

Financial institutions have been urged to adopt more flexible approaches in recovering loans from struggling businesses instead of rushing to auction borrowers’ property, as access to credit expands among small and medium-sized enterprises.

Narok County Executive Committee Member for Finance David Ole Muntet said banks should consider the circumstances facing borrowers and explore restructuring options before taking punitive recovery measures.

“Borrowing is a wedding, but paying back can feel like a funeral,” Muntet said.

“While people must pay their loans, we urge banks to find better approaches to handling defaulters rather than immediately auctioning properties. There is always a way out.”

His remarks came as Equity Bank stepped up efforts to move local enterprises beyond the sale of raw agricultural products and connect them to value-addition opportunities and wider markets.

Equity Bank Kenya Head of Retail and Branch Business Carol Rutto said customers seeking tractors and commercial trucks could access financing of up to 105 per cent, while unsecured loans of up to Sh10 million were available without collateral.

The push for more flexible financing comes against a history of limited access to formal credit among farmers, particularly those operating on communally held land where borrowers may lack individual title deeds.

Equity Bank Managing Director Moses Nyabanda said financing should help farmers and other businesses increase production while also creating stronger links to markets where processed products can command higher returns.

“We do not just want to increase yields; we want to connect you to the market,” Nyabanda said, citing livestock farmers as an example. He said farmers should be supported to process hides into leather products rather than selling raw hides at lower prices.

The bank also said it would align agricultural loan disbursements with crop cycles, with Nyabanda promising a turnaround period of about two weeks for agricultural credit.

Equity Bank Commercial Director Kagiso Moloi said the financial institution viewed Narok as a growing commercial market driven by livestock, trade and tourism.

“Narok is not a small market to us,” Moloi said, noting that the bank intended to provide financing to businesses as the local economy expands.

The lender said it was also increasing access to asset finance and unsecured credit.

Farmer Okipira Ole Tutai recalled that access to agricultural finance was difficult when he started his agribusiness in 1985 because state-backed lenders required title deeds as security.

He said the emergence of more flexible forms of lending enabled him and other farmers to expand their businesses and acquire productive assets.

Business owners also said loan restructuring played an important role in helping private schools survive the economic disruption caused by the Covid-19 pandemic, allowing institutions to defer repayments until conditions improved.

The discussions in Narok highlight a broader challenge for lenders and policymakers: expanding access to credit while ensuring that businesses are able to withstand economic shocks and repay loans without losing productive assets.

For SMEs, participants said, access to finance must therefore be accompanied by market opportunities, value addition and financing structures that reflect the realities of different sectors.