The Kenyan government is poised to receive a donation of Ksh 667 million from the British High Commission in the United Kingdom, aimed at enhancing the capabilities of Micro, Small, and Medium Enterprises (SMEs) within the nation.
This funding, which was announced on Tuesday, November 5, is expected to benefit at least 10,000 MSMEs and 50,000 households, thereby creating, safeguarding, and supporting over 89,000 jobs, in addition to improving access to essential services for more than 200,000 individuals.
The initiative, known as the ‘Listed SME Debt Fund,’ is backed by FSD Africa and seeks to mobilize up to Ksh 38.85 billion (USD $300 million) in sustainable financing to offer affordable credit to micro, small, and medium-sized enterprises (MSMEs).
Managed and listed in Kenya, this fund aims to present a compelling investment opportunity for local investors by mitigating risks associated with investments in MSMEs while providing attractive returns.
“We must 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,” British High Commissioner to Kenya, Neil Wigan stated.
The fund is designed to be non-sector-specific, thereby addressing the financial needs of low-income Kenyan business owners by reducing borrowing costs.
The high cost of capital in Kenya presents significant challenges for small and medium-sized enterprises (SMEs).
Presently, interest rates hovering around 40 percent create obstacles for small business owners, hindering their ability to generate employment opportunities.
Furthermore, this funding initiative aims to motivate pension funds to invest in sectors such as SMEs, which are vital for the movement of goods, services, and labor within the nation.
Despite regulatory approvals permitting investments of up to 30 percent in alternative assets, Kenyan institutional investors, who manage assets exceeding Ksh 3.8 trillion (approximately USD $30 billion), have been slow to allocate funds to alternative investments, particularly in SMEs.
The establishment of the SME-listed fund will introduce a new asset class, enabling institutional investors to diversify and enhance the stability of their portfolios.
This initiative is in line with FSD Africa’s objective to enrich and diversify capital markets through innovative approaches.
Mark Napier, CEO of FSD Africa, emphasized that the fund will provide micro, small, and medium enterprises (MSMEs) with opportunities for cross-border growth, thereby bolstering local employment rates and contributing to economic development.
“The SME sector holds tremendous potential for Kenya’s socio-economic transformation, comprising approximately 98 per cent of all businesses and creating a significant number of jobs,” he asserted.
Small and medium-sized enterprises (SMEs) play an essential role in Kenya’s economic landscape, representing more than 98 percent of both formal and informal businesses.
Furthermore, SMEs contribute approximately 24 percent to the nation’s gross domestic product (GDP).
They are also significant drivers of employment, particularly for marginalized communities, including youth, women, and individuals with disabilities, providing over 14 million jobs, which constitutes 30 percent of the total employment in the country.
