Microfinance expert, Hezekiah Kariuki/HANDOUT
The Culture of Banks lending Funds to the government, without giving significant priority to common citizens, is hurting the economy, says a microfinance expert, Hezekiah Kariuki.
Kariuki argues that when banks focus on lending to the government without prioritising funding for small and medium enterprises, they can register huge profits at the expense of millions of citizens’ businesses.
Kariuki, the Director of Together as One Microfinance, says the interests that some mainstream financial institutions are earning from government lending are 'unrealistically huge'.
The statements that get published showing banks' profits annually are in billions, while Small traders are starved of business growth, adding that the trend has registered slow business growth in micro and medium enterprises.
"Many small and medium businesses lack financial support from mainstream banks and end up collapsing as these financial institutions focus only on huge lending, leaving potential entrepreneurs vulnerable," Kariuki said.
While we cannot hinder the banks from lending their money, it's important for the government to control the lending to safeguard its citizens from cash flow shortages.
He said that big lenders in the market should strike a balance between Huge and small lending to help grow the economy at all levels in society.
Kariuki, who is also the Director of Comfort Homes, lamented the huge profits in billions made by some banks while millions of common Kenyans are still languishing in poverty.
"I do not oppose banks' growth, but it should not be achieved by denying other players the opportunity to grow and build the economy," he said.
He stressed the need for the banks to put more focus on building the nation rather than just private institutions.
Some profit digits made by some institutions sound unrealistic, but only reveal how borrowers are oppressed since the interests charged on loans to government are paid by taxpayers' funds.
He also took issue with the strict and high demand for collateral in banking lending, and bureaucratic procedures that affect common lenders.
"With government support and Lasting Partnerships, Microfinance institutions can seal the borrowing gaps for economic growth," he said.
