UK Invests $5.2 Million to Boost Kenyan SMEs with Debt Fund
The UK government, through its British High Commission in Nairobi, has pledged KSH 667 million ($5.2 million) to create a fund aimed at increasing financing access for small and medium-sized enterprises (SMEs) in Kenya. This initiative, led by FSD Africa—a UK-funded development finance institution—seeks to mobilize KSH 38.85 billion ($300 million) to support local businesses and drive economic growth.
Expanding Investment in Kenya’s SMEs
The “Listed SME Debt Fund” is structured to attract both local and global investors into Kenya’s SME sector, fostering job creation and economic resilience. The fund aims to offer more affordable credit, reducing interest rates that currently reach up to 40% for SMEs. This high cost of borrowing has been a major challenge for smaller businesses. The fund, managed locally, will enable Kenyan pension funds and other institutional investors to invest in the SME sector, enhancing their portfolios while strengthening the economy.
Strategic Investment Breakdown
The initial round aims to raise $100 million, with $240 million from Kenyan institutional investors and $60 million from international sources. The fund targets supporting 10,000 SMEs, aiding 50,000 households, and creating nearly 90,000 jobs. Its broad scope covers various sectors including agriculture, technology, and manufacturing, helping to lower the cost of capital for diverse entrepreneurs.
Focus on Inclusive Growth
British High Commissioner Neil Wigan highlighted the significance of reducing borrowing costs to support “hardworking hustlers,” especially youth, women, and people with disabilities who face financial exclusion. The initiative is expected to enhance inclusive economic development in Kenya.
New Investment Opportunities for Pension Funds
This fund also offers an attractive opportunity for Kenyan pension funds, which manage over $30 billion but have historically under-invested in alternative assets. With the Listed SME Debt Fund, these institutions can diversify their portfolios, gaining stable returns while mitigating risks associated with SME lending.
Strengthening Kenya’s Economic Backbone
Mark Napier, CEO of FSD Africa, emphasized the crucial role of SMEs in Kenya, as they constitute 98% of enterprises and significantly contribute to employment. By expanding access to credit, this fund will support the growth of these essential businesses, enabling them to scale and drive Kenya’s economic development. Napier expressed optimism that the initiative would open doors for SMEs to grow locally and expand internationally, creating widespread opportunities across the nation.
Source: InnovationVillage