NCA to offer cheap loans to small contractors

Loan calculator.
The revolving fund will draw from the new imposed construction levy. PHOTO/FILE
The National Construction Authority (NCA) will offer cheap loans to small contractors licensed to carry out construction works in Kenya, in a move aimed at giving capacity to cash strained builders.

NCA is seeking to raise Sh1.7 billion annually for the establishment of a revolving fund that will see small contractors accessing loans of up to Sh5 million to finance their projects.

The revolving fund will draw from the new imposed construction levy of 0.5 per cent of the value of a construction projects, including houses and roads exceeding Sh5 million.

“The objective is to assist contractors who are unable to finance small construction projects. We will start with up to Sh5 million so that we can give contractors capacity,” NCA chief executive Daniel Manduku told a parliamentary committee on Tuesday.

The construction loans will be offered at interest rates of between four and six per cent through commercial banks – very competitive rates compared to the average bank mortgage rate of 16.5 per cent.

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Small contractors will be allowed to use the fund as bid bonds (written guarantee that assures project owners that a selected bidder will complete an assignment without running into cash flow problems).

The fund will particularly benefit women, youth and physically challenged builders who have been unable to bid for public tenders despite the government reserving 30 per cent of state contracts to them.