News Column

Treasury seeks loans for special groups

January 16, 2014


The Treasury is courting banks to help youth, women and persons with disability access working capital when they win government tenders. Public procurement director Celestine Otunga said the banks would extend loans to the businesses on the strength of local purchase orders, enabling the groups compete for the Sh240 billion in public goods and services reserved for them annually. "We have negotiated with several banks to implement the programme," said Ms Otunga on Thursday during a forum for business owners with disability at the Kenyatta International Convention Centre . She said Equity Bank , Ecobank , KCB , Family Bank and Co-op Bank had agreed on the arrangement. Entrepreneurs bidding for tenders under Access to Government Procurement Opportunities (Agpo) will present a local purchase order indicating type of products, quantity and their price to banks for financing. Due to the big risk factor associated with this business group, Treasury will act as the loan guarantor. "The Treasury will reimburse the funds a bidder owes to the bank at the agreed time, according to the terms and conditions," Ms Otunga noted. She said the Treasury would also endorse invoices from suppliers, enabling them to release goods to tenderers on credit for payment when the contract is completed. This provides a new frontier for financial institutions and comes as a big relief to small-scale entrepreneurs who are often denied access to credit facilities for lack of collateral. Ms Otunga said more than 15,000 special interest groups mostly women and youth have been registered to compete for Sh240 billion worth of public contracts in the current financial year. READ: 5,000 youth groups get the nod to apply for State tenders Registration under Agpo is done both at the national Treasury and in treasuries in the 47 counties. In October last year, President Uhuru Kenyatta directed that 30 per cent procurement of government tenders be reserved for special groups for financial inclusion and wealth creation. The Public Procurement and Disposal (Preference and Reservations) Regulations 2013 relaxed bidding condition for public tenders to encourage participation by the intended groups. Special groups do not have to prove their financial standing to participate in a tender. They also do not have to place a performance bond, which cushions the government in case the contractor supplies substandard goods or does shoddy work. Instead, bidders sign a tender declaration form committing not to default on the contract award. This means even start-ups without a penny can now compete with established businesses for tenders. Also, under Agpo, the tender document is free of charge when application is done online and Sh1, 000 when done physically, down from Sh3,000. Heavy capital contracts such as road construction are also required to be broken down into sub-contracts, manageable by special groups. Ms Otunga said less than 100 businesses belonging to persons with disability have been registered, partly because they are the only group required to be physically present during registration. Shareholding of companies under Agpo is required to comprise 70 per cent of special groups. A lobby group for traders with disabilities is pushing for a third of the tenders reserved under Agpo (Sh80 billion worth)to be reserved for them. Nominated member of Parliament Johstone Sakaja in November last year published a Bill seeking to have a third of all government contracts allocated to young people.

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Source: Business Daily (Kenya)

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