Offering a significant boost to Kenya’s small business sector, the UK has announced a KSH 667 million (£3.4 million) fund to support micro, small, and medium enterprises (SMEs).
The fund, managed by FSD Africa, aims to mobilise KSH 38.85 billion (£300 million) of financing, offering much-needed affordable credit to Kenyan businesses struggling with high borrowing costs.
Mobilising Finance for Growth
The new ‘Listed SME Debt Fund’ was unveiled at a pan-African capital markets conference in Nairobi. The British High Commissioner to Kenya, Neil Wigan, emphasized that this initiative is part of the UK’s longstanding partnership with Kenya, aiming to reduce borrowing costs and stimulate economic growth.
FSD Africa manages the fund, which expects to mobilize substantial financing from domestic and foreign investors.
According to FSD Africa’s CEO, Mark Napier,
“This fund will provide affordable credit to SMEs, a sector that holds immense potential for Kenya’s socio-economic transformation.”
The fund will offer lower borrowing rates to at least 10,000 SMEs and contribute to job creation, targeting 89,000 new jobs across various industries.
The Importance of Kenyan SMEs
SMEs account for 98% of businesses in Kenya, making them a vital engine of the economy. These enterprises play a crucial role in employment generation, contributing around 24% of the country’s GDP and employing 30% of Kenya’s workforce, particularly women, youth, and persons with disabilities.
However, access to affordable credit remains a challenge, with some businesses facing interest rates as high as 40%.
The SME Debt Fund will address these challenges by channelling capital into Kenyan businesses, enabling them to expand operations, create jobs, and improve livelihoods.
Furthermore, this fund will help diversify investment portfolios, especially for local pension funds, providing attractive returns while de-risking SME investments.
The Benefits of Long-Term Investment
The UK and Kenya have actively pursued sustainable development through their strategic partnership, reinforcing their commitment with this latest initiative. Consequently, this collaboration yields significant benefits, including job creation and economic growth.
Moreover, the fund will have broader social impacts, notably improving access to essential services for over 200,000 Kenyans. Furthermore, this partnership enhances mutual prosperity, security and stability.
Additionally, this move is expected to encourage more local pension funds to invest in Kenya’s real economy, which will deepen the country’s capital markets and enhance financial inclusion.
The fund will raise an initial KSH 11 billion (£100 million), targeting institutional investors for long-term growth. As it stands, Kenyan pension funds hold assets worth over £21 billion, yet many have been slow to invest in alternative asset classes despite regulatory approval.
Impact of the UK-Sponsored SME Debt Fund |
|---|
| SMEs Supported: 10,000+ |
| Jobs Created: 89,000 |
| Households Reached: 50,000 |
| People Accessing Services: 200,000+ |
The Road Ahead
This fund exemplifies how strategic partnerships can support sustainable growth while delivering for the ‘hustlers’ of Kenya—the women, young people, and marginalized communities often pushed to the fringes of the economy.
The UK’s long-term commitment to Kenya’s growth, combined with innovative financial tools from FSD Africa, will create transformative opportunities for small and medium-sized enterprises, bolstering Kenya’s economic future.
As Neil Wigan noted,
“We must lower the cost of borrowing for Kenyans. This fund further bolsters the UK’s financial toolkit in Kenya, delivering long-term job creation and economic growth.”
Sources: THX News & British High Commission Nairobi.
