The government of Kenya is set to benefit from 5.2 million USD (about Ksh667 million in the current exchange rates) donated by the United Kingdom’s British High Commission in a bid to bolster Micro, Small to Medium Enterprises (SMEs) in the country.
The funding announced on Tuesday, November 5, will support at least 10,000 MSMEs and 50,000 households, create, protect, and support over 89,000 jobs as well as improve access to basic services for over 200,000 people.
The ‘Listed SME Debt Fund’ is sponsored by FSD Africa and aims to mobilize up to Ksh38.85 billion (USD $300 million) of sustainable finance to provide affordable credit to micro, small, and medium-sized enterprises (MSMEs).
The fund which will be listed and managed in Kenya aims to provide an attractive investment opportunity for Kenyan investors, by de-risking investments in MSMEs, whilst offering 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.
Additionally, the fund is not sector-specific, so it will meet the needs of Kenyan business owners in the low-income category by lowering the cost of borrowing money.
Capital in Kenya is quite high making SMEs in Kenya difficult to operate. Currently, interest rates of around 40 per cent pose a challenge for small business owners making it hard to create jobs.
Further, the funding will also encourage pension funds to invest in sectors like SMEs that support the flow of goods, services, and labour in the country.
Despite regulatory approvals allowing investment of up to 30 per cent in alternative assets, Kenyan institutional investors which collectively have assets under management (AUM) in excess of Ksh3.8 trillion (USD $30 billion) invest little into alternative investments like in the SMEs.
The SME-listed fund will provide a new asset class, helping institutional investors diversify and stabilize their portfolios. This aligns with FSD Africa’s mission to deepen and diversify capital markets through innovation.
On his part, FSD Africa’s CEO Mark Napier noted the fund will offer MSMEs a route to growth across borders and support local employment rates and the growth of the economy. “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.
SMEs are crucial to Kenya’s economic ecosystem as they account for over 98 per cent of businesses both informal and formal businesses. Equally, SMEs account for about 24 per cent of Kenya’s gross domestic product (GDP).
SMEs also serve as vital engines of employment generation, particularly for marginalized groups such as youth, women, and persons with disabilities, accounting for over 14 million jobs which translates to 30 per cent of all jobs.
