When the first case of COVID-19 was detected in Kenya in March 2020, it marked the beginning of a long journey of business uncertainty, disruption and great anxiety for entrepreneurs of all categories. It was especially hard for micro-enterprises and other small businesses, which traditionally do not have cash reserves or multiple income streams, to cushion them during economic downturn. While some businesses managed to stay afloat, hundreds others faced serious difficulties that led to their closure or severely reduced operations.
A study by the World Bank published in January 2021 found that small and micro-sized businesses were more severely affected by the pandemic than larger firms and those small businesses were often forced to permanently close or temporarily cease operations as compared to larger firms. In addition, a larger drop in sales was observed for micro-sized and small businesses. Without some form of external assistance, most businesses were not resilient enough to survive the downturn.
Recognising the devastating effects of COVID-19 on businesses and families in Kenya, Mastercard Foundation launched the COVID-19 Recovery and Resilience Programme (CRRP) to help micro- small- medium-sized enterprises (MSMEs) to respond to and withstand the impact of pandemic while strengthening their resilience in the long run.?
The CRRP provided collateral- and interest-free loans in several categories to businesses in different sectors. It also offered training and other support to enable them utilise funds prudently and manage risks during the pandemic It primarily targeted women- and youth-led businesses across all sectors, including wholesale and retail trade, clothing and fashion, and agriculture. Borrowers accessed the facility by application through their member association and had to pass screening and due diligence procedures before a loan was granted.
Over KSh 686 million in loan capital had been disbursed to roughly 21,000 borrowers by the programme
The programme was implemented by a consortium led by Grassroots Business Fund (GBF) and included Cardno Emerging Markets and microfinancier, 4G Capital together with Kenya National Chamber of Commerce and Industry (KNCCI); Kenya Private Sector Alliance (KEPSA); and WomenWork Network (WWN) and Cardno coordinated applications and the necessary due diligence screening. 4G managed the disbursement of loans to successful applicants and collected repayments.
The programme was fully digital, and all applications, assessments, disbursement, repayments as well as training were conducted virtually.. A unique aspect of the programme was the fast turnaround, from conception to deployment, owing to the urgency of the situation, and the fact that it was entirely virtual in response to the constraints imposed by the COVID outbreak. The programme created new digital channels to reach MSMEs and leveraged existing ones such as MPESA.
By June 2021, over KSh 686 million in loan capital had been disbursed to roughly 21,000 borrowers by the programme. About KES 270 million had been repaid by that time, with a balance of KES 416 million outstanding. In addition, CRRP sustained nearly 43,000 jobs , of which 44% or 8,700 were held by young people and 84% or 16,500 by women.
The implementation of CRRP offers several lessons that can be applied in running similar programmes successfully:
Looking into the future: As Kenya moves into a post-COVID recovery phase, micro-and small businesses remain vulnerable and require support from other partners. Other MSME lenders can step into the gap and help to accelerate business recovery by offering flexible and affordable products to this critical sector. The experiences of the COVID-19 Recovery and Resilience Programme and the lessons learnt can inform the design of similar programmes to enrich their impact. This is a call to arms.The CRRP proved that by working in partnership, we can protect this vital sector of our economy, encourage it to thrive, be adaptive, sustainable and profitable.
Distributed by APO Group on behalf of The Mastercard Foundation.