Home Business UK Boosts Kenyan Small Businesses with $5.2 Million Debt Fund

UK Boosts Kenyan Small Businesses with $5.2 Million Debt Fund

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The UK government, through its High Commission in Nairobi, has allocated KSh 667 million ($5.2 million) to establish a fund aimed at increasing access to financing for Kenyan small and medium-sized enterprises (SMEs).

Led by FSD Africa, a UK government-funded development finance institution, this “Listed SME Debt Fund” aims to mobilize up to KSh 38.85 billion ($300 million) to support local businesses.

The fund’s innovative structure will attract both domestic and international investors to Kenya’s SME sector, thereby stimulating economic growth and job creation, reports state.

The fund is designed to provide affordable credit to a wide range of Kenyan businesses by offering lower interest rates, which currently average as high as 40% for SMEs.

These high borrowing costs have hindered business growth across various industries, particularly for smaller enterprises.

The debt fund, listed and managed in Kenya, will facilitate investment in the SME sector by local pension funds and other institutional investors, benefiting both their portfolios and the broader Kenyan economy.

An initial $100 million round is planned, targeting $240 million from Kenyan institutional investors and $60 million from international investors. The overall goal is to support around 10,000 SMEs, benefit 50,000 households, and create nearly 90,000 jobs.

The fund’s broad sectoral scope enables it to support businesses in agriculture, manufacturing, technology, and other sectors, thereby reducing the cost of capital for Kenya’s diverse entrepreneurial landscape.

British High Commissioner Neil Wigan emphasized the importance of fostering an inclusive economic environment in Kenya.

“The UK’s commitment to lower borrowing costs will directly benefit the hardworking hustlers of this country, including young people, women, and individuals with disabilities who often face financial barriers,” he stated.

In addition to driving economic development, this fund presents an attractive investment opportunity for Kenyan pension funds and institutions seeking alternative assets. Kenyan pension funds, managing over $30 billion, have traditionally under-invested in alternative assets despite regulatory provisions.

FSD Africa’s Listed SME Debt Fund offers a new avenue for these funds to diversify their portfolios, providing stable returns while mitigating the risks typically associated with SME lending.

FSD Africa CEO Mark Napier highlighted the crucial role of SMEs in Kenya’s economy, noting that they constitute 98% of enterprises and a significant portion of the country’s employment.

“By expanding credit access to SMEs, we can support these vital engines of job creation, making Kenya’s economy more inclusive and resilient. I am confident that this fund will empower more SMEs to grow and expand internationally, creating economic opportunities for communities across Kenya,” Napier stated.

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