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Exporters' Forum on Trade Finance

Dr Shyam Agrawal, is a CFTC Advisor based in Nairobi.

Export Promotion Council, an export promotion agency under the administrative control of the Government of Kenya recently organised an ‘Exporters’ Forum on Trade Finance’. The forum was organised in collaboration with Kenya Commercial Bank with whom EPC has signed a Memorandum of Understanding (MOU) as per its new strategic orientation to adopt partnership approach for export development.

The forum was inaugurated by the Minister of Trade, Govt of Kenya and was attended by over 150 representatives from the trade and industry, trade support institutions, chambers of commerce and senior officials from the government, financial and banking sector.

The event, first of its kind, organised by EPC, created a great deal of excitement in the wake of impact of global financial crisis on Kenyan economy in general and export sector in particular. The excitement was further added by the recently published Africa Competitiveness Report 2009 by the African Development Bank and the World Bank which has identified inaccessibility of affordable trade finance as the major obstacles to Kenya’s exports besides other factors such as poor infrastructure among others.

The discussions during the debate emerged to be very lively and participative. The participants actively participated in three working group meetings namely ‘ Access to Trade Finance and Insurance; Trade finance Instruments and Payment Mechanisms and SME Funding for Exports specially constituted for the purpose so as to ensure focussed discussions and practical recommendations.

There was general consensus that global recession and financial crisis has impacted Kenyan exports to a large extent. The participants increasingly felt that banking and other financial institutions needs to be more responsive and devise innovative banking and financial instruments to meet the requirements of trading community so as enable them to face international competition.

The recommendations for SME funding for exports were watched with greater interest. The participants raised several issues such as biased treatment to SMEs, demand of collaterals, high interest rates and non availability of inadequate working capital besides others.

However, it was interesting that the basic issue of conceptual frame work and definition for SMEs was not raised by any of the participants which made me to intervene. It is true that development of Kenyan economy largely depends on the growth of micro, small and medium enterprises. The policy documents have deliberated at large on the subject of capacity building and empowering MSMES.

It is however surprising that no document has talked of defining and developing a conceptual framework for these enterprises. In the absence of such a framework all enterprises claims to be the SMEs leading to unfair treatment to the needy ones. The government of Kenya needs to learn lesions from other countries particularly in Asia which have created a flawless conceptual framework for such enterprises.

It is now the high time the government, private sector and civil society to sit together and understand the needs of MSMEs and appropriately define MSMES by the act of parliament. No policy or support framework can achieve success unless the beneficiaries of such a mechanism are clearly determined.

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