58. Power of Cabinet Secretary to guarantee loans (1) Subject to subsection (2), the Cabinet Secretary may guarantee a loan of a county government or any other borrower on behalf of the national government and that loan shall be approved by Parliament.

(2) The Cabinet Secretary shall not guarantee a loan under subsection (1) unless— (a) the loan is for a capital project; (b) the borrower is capable of repaying the loan, and paying any interest or other amount payable in respect of it; (c) in the case of a private borrower, there is sufficient security for the loan; (d) the financial position of the borrower over the medium term is likely to be satisfactory; (e) the terms of the guarantee comply with the fiscal responsibility principles and financial objectives of the national government; (f) where Parliament has passed a resolution setting a limit for the purposes of this section— (i) the amount guaranteed does not exceed that limit; or (ii) if it exceeds that limit, the draft guarantee document has been approved by resolution of both Houses of Parliament; (g) the Cabinet Secretary takes into account the equity between the national government’s interests and the county government’s interests so as to ensure fairness; (h) the borrower complies with any conditions imposed by the Cabinet Secretary in accordance with the regulations; 48 [Rev. 2020] Public Finance Management No. 18 of 2012 (i) the Cabinet Secretary has taken into account the recommendation of the Intergovernmental Budget and Economic Council in respect of any guarantee to a county government; and (j) the loan is made in accordance with provisions of this Act and any regulations made thereunder.

(3) Parliament may approve a draft loan guarantee document as provided by subsection (2)(f)(ii) only if satisfied that— (a) the guarantee is in the public interest; (b) the borrower’s financial position is strong enough to enable the borrower to repay the loan proposed to be guaranteed and to pay interest or other amounts payable in respect of the loan; and (c) the loan is geared towards stimulating economic growth in a county government.

(4) To enable Parliament to decide whether or not to approve a draft loan guarantee document as provided by subsection (3), the Cabinet Secretary shall prepare and submit to each of the House of Parliament a paper that— (a) gives details of the loan that is proposed to be guaranteed, including the amount of the loan, the terms of repayment, and the details of the interest or any other amount payable under the loan; (b) specifies the national government’s total contingent liability under guarantees given under this section; and (c) specifies any other information that the Cabinet Secretary considers relevant.

(5) Notwithstanding the provisions of subsection (2) (c), the Cabinet Secretary may guarantee credit which is extended to a private borrower, for enterprise development or such other purpose as the Cabinet Secretary may prescribe, where the borrower does not have sufficient security.

(6) The Cabinet Secretary may only guarantee credit which is extended to a borrower under subsection (5), if the borrower- (a) is a micro, small or medium enterprise; (b) is registered as a business or company under the relevant laws; (c) is a registered taxpayer and is in compliance with the relevant tax laws; (d) is registered by a county government and holds a valid business permit or trade licence; (e) is not part of any group or related to any enterprise which would otherwise not be eligible for credit guarantee under this section; and (f) agrees in writing to comply with the provisions of this Act and any conditions that may be imposed by the Cabinet Secretary.

(7) A guarantee for credit extended to a micro, small or medium enterprise under subsection (5) shall be for a portion of the credit.

(8) A guarantee for credit extended to a micro, small or medium enterprises shall be given under a scheme established by the Cabinet Secretary for the partial mitigation of default risks for credit extended to micro, small or medium enterprises.

(9) The Cabinet Secretary shall prescribe regulations for the operation of the scheme under subsection (8) which shall, provide for the following — 49 No. 18 of 2012 Public Finance Management [Rev. 2020] (a) the institutions that shall be eligible to extend credit to micro, small or medium enterprises for which guarantees may be given under subsection (5); (b) enterprises that shall be eligible to be given a guarantee under subsection (5); (c) the conditions for a grant of guarantee for credit extended to a micro, small or medium enterprise under subsection (5); (d) the proportion of security for the credit that a micro, small or medium enterprise shall provide before being granted a guarantee under subsection (5); (e) the types of credit extended to micro, small or medium enterprises that shall be eligible for guarantees under subsection (5); (f) the periods for which guarantees for credit to micro, small and medium enterprises shall be applicable; (g) the circumstances under which a credit guarantee shall be liquidated or varied if a borrower defaults on credit that was guaranteed under subsection (5); (h) the maximum percentage of the Scheme funds which may be used to guarantee any individual borrower; (i) mechanisms to ease access to credit guarantees by enterprises owned by women, youth and persons with disabilities; (j) mechanisms for recovering the money from the borrower where the credit guarantee is liquidated; (k) a limit on the period of default to a maximum of six months; and (l) any other relevant matter. [Act No. 16 of 2020, s.4]

59. Cabinet Secretary to submit a statement on loan guarantee to Parliament Not later than fourteen days after the guarantee is entered into, the Cabinet Secretary shall submit to Parliament and publish a statement— (a) stating that a guarantee is entered into; and (b) containing details of— (i) the guarantee, including the name and other particulars of the borrower whose loan is guaranteed; (ii) the duration and nature of the guarantee; (iii) a risk assessment in respect of the guarantee; and (iv) any other information prescribed by regulations for the purposes of this subsection. 59A. Cabinet Secretary to submit a report on credit guarantees to micro, small and medium enterprises to Parliament.