General Motors East Africa (GMEA) yesterday announced a partnership with Co-operative Bank that will see the bank offer 95% financing for Isuzu vehicles to SME’s. The asset finance loans will attract an interest rate of 14%. The deal is meant to address the challenge of access to finance for SME’s which have had a challenge accessing finance. The asset finance loan will be payable in 5 years.
To sweeten the deal, borrowers will also be able to access a working capital loan of up to a maximum of Ksh. 300,000 which will be repayable in 12 months. This should enable the businessmen who have acquired the vehicles to expand their businesses so as to be able to make the repayments comfortably. This is important due to the fact that banks have been denying SME’s credit since the interest rate cap was passed into law due to the risks involved.
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A study conducted by the Strathmore Business School in 2016 indicated that 2.2 million SMEs have closed down in the last 5 years. 73% of these were made up of motor vehicle and motorcycles repair business. The tough business environment experienced last year must have led to a drop in both vehicle and part sales hence this move by GMEA to find a way to help SMEs access their products.