Kenya: UK announces $5.2 million in Nairobi to set up SME debt fund

The UK announced on Tuesday 5 November, through the British High Commission in Nairobi, the allocation of KSH 667 million ($5.2 million) to set up a debt fund for SMEs in Kenya. Created in collaboration with FSD Africa, a development finance institution supported by the British government, the fund aims to mobilise $300 million to strengthen Kenya’s economic fabric by facilitating access to credit for SMEs. It “strengthens the UK’s financial toolkit in Kenya, which has supported job creation and long-term economic growth for many years, and will benefit all hard-working people in this country – particularly women, young people and people with disabilities,” said Neil Wigan, British High Commissioner to Kenya.

The listed SME debt fund is aimed at a range of local and international investors, with a structure designed to attract Kenyan pension funds and other institutional investors. The aim is to provide local SMEs with access to finance at lower rates, at a time when borrowing costs for these businesses can be as high as 40%. This level of interest rates represents a significant disincentive for SMEs, which make up 98% of businesses in Kenya and employ a significant proportion of the workforce. A first round of funding of $100 million is in the pipeline. But in the long term, $240 million is expected from Kenyan institutions and $60 million from foreign investors.

The fund plans to support 10,000 SMEs, reach 50,000 households and generate about 90,000 jobs in various sectors, ranging from agriculture and manufacturing to technology. The program could also offer Kenyan pension funds, which have more than $30 billion in assets under management, an investment opportunity in alternative assets, allowing them to diversify their portfolios while stimulating the national economy.