The United Kingdom has announced a significant financial initiative aimed at supporting Micro, Small, and Medium Enterprises (SMEs) in Kenya. A move that is part of the country’s long-term commitment to providing investment solutions that foster growth and job creation in East African nation.
The British High Commission in Nairobi unveiled a fund, sponsored by FSD Africa, of Sh670.80 million ($5.2 million) that aims to bolster small businesses. The impact of this initiative, dubbed as the ‘Listed SME Debt Fund’,is expected to be far-reaching.
It is projected to support at least 10,000 MSMEs, benefit 50,000 households, create or protect over 89,000 jobs, and improve access to basic services for more than 200,000 people. The fund will cater to a wide range of Kenyan business owners, from craftsmen to financiers to farmers, by reducing the cost of borrowing.
According to Neil Wigan, British High Commissioner to Kenya, the aim is to lower the cost of borrowing for Kenyans.
“This fund further bolsters the UK’s financial toolkit in Kenya which has supported long-term job creation and economic growth over many years, and it will deliver for all the hardworking hustlers of this country – especially women, young people and persons with disabilities – who are often pushed right to the margins of the Kenyan economy,” he said.
The importance of SMEs to Kenya’s economy cannot be overstated. They account for 98% of businesses and contribute about 24% of Kenya’s gross domestic product. Moreover, SMEs are crucial engines of employment generation, particularly for marginalized groups such as youth, women, and persons with disabilities, accounting for 14 million (30%) of jobs in the country.
However, SMEs currently face prohibitively high interest rates of up to 40%, which significantly hampers their ability to grow and create jobs. The new fund aims to address this challenge by providing an attractive investment opportunity for Kenyan investors.
It looks to de-risk investments in MSMEs while still offering appealing returns. It also encourages pension funds to be invested in sectors that support the flow of goods, services, and labor in Kenya.
In accordance to Mark Napier, CEO of FSD Africa, the SME sector holds tremendous potential for Kenya’s socio-economic transformation.
“We are thrilled to launch this innovative fund dedicated to supporting small and medium enterprises in Kenya. This fund will provide affordable credit to businesses which have, historically, faced challenges in accessing financing. Moreover, the fund will offer MSMEs a route to growth across borders and support in local employment rates and the growth of the Kenyan economy,” he said.
The Listed SME Debt Fund has an ambitious goal of mobilizing up to Sh38.70 billion ($300 million) in sustainable finance. This substantial sum is intended to provide affordable credit to Micro, Small, and Medium Sized enterprises in Kenya. Sh30.96 billion ($240 million) is to be raised from domestic institutional investors, with the remainder coming from foreign investors.
This initiative represents a significant step in strengthening the economic relationship between the UK and Kenya. This is a crucial step in driving economic growth, creating jobs, and fostering sustainable development in Kenya.
