NAIROBI, Aug. 14 (Xinhua) -- Kenya is in the process of putting in place a credit guarantee scheme for small and medium enterprises (SMEs) in order to boost economic growth, a senior government official said on Tuesday.

Peter Munya, Cabinet Secretary in the Ministry of Industrialization, Trade and Cooperatives, told a trade forum in Nairobi that one of the biggest challenges facing the SMEs is lack of access to affordable credit.

"The credit guarantee schemes will result in overall economic growth because it will allow commercial banks to advance SMEs loans at a concessional interest rate," Munya said during the launch of the SME FEST 2018 Success Conference.

The conference, which runs from Sept. 19 to 20 will bring together key policy makers and over 1,000 small enterprises to network and discuss ways to increase their role in economic development.

The SME credit guarantee scheme will receive funding from the National Treasury and will repay banks in case SMEs default on their loans.

He said the government is aware of the SME's potential to create opportunities for employment and wealth creation.

Munya said the government is also prioritizing the expansion of SMEs because they contribute about 20 percent to Kenya's Gross Domestic Product and the bulk of employment opportunities.

Munya revealed that small firms are vital to the economy because of their value addition to local raw materials.

He added that Kenya loses significant revenue through the exports of raw materials and importation of finished goods.

The cabinet secretary said that Kenya will leverage on its abundant natural resources to develop cottage industries.

Mathew Nyamu, the Assistant Director of Industrialization at the Policy at the Ministry of Industrialization, Trade and Cooperatives said that the government will develop a policy that will provide incentives for big firms to subcontract some of their work to SMEs.

Nyamu said liberalization of the economy has led to SMEs facing competition from foreign industries.

"So, the best way to protect our local firms is through enhancing their competitiveness and efficiencies," he added.

Kenya Association of Manufacturers (KAM) Chairman Sachen Gudka said that President Uhuru Kenyatta's Big Four Agenda has highlighted manufacturing as one of its four main pillars in the next five years.

He noted that the manufacturers are committed to achieving the goal of increasing their share of the national wealth to 15 percent in the next five years and reap the accompanying benefits such as employment creation.

The chairman added that SMEs are the backbone of a thriving economy and are often expected to play a prominent role in job creation in Kenya.

He observed that SMEs represent small enterprises that cut across all sectors of the economy and provide one major source of employment second to the agricultural sector.