The African Development bank (AfDB) has approved the sum of €20 million to support youth and women entrepreneurs engaged in agricultural value chains in Kenya. The amount is split into two – an equity investment of €18 million in the Africa Guarantee Fund (AGF) and another €1.2 million.
The funding, approved on June 6, 2023, was provided by the European Union (EU) under its partnership with the African Development Bank Group.
According to Mrs. Nnenna Nwabufo, the Bank Group’s Director General for East Africa, she stated that the approval was “another milestone in the implementation of the partnership with the EU, which also signals the importance given to the role of women and youth in the agricultural sector in Kenya.”
The demand for financing among Micro, Small, and Medium Enterprises (MSMEs) in Kenya remains unmet, exacerbated by the impact of the Covid-19 pandemic. The International Finance Corporation (IFC) estimates that there is a finance gap of US$19.38 billion for SMEs, which accounts for approximately 30 percent of the country’s GDP.
The Covid-19 Business Pulse Survey (BPS) conducted by the World Bank reveals that numerous viable businesses are still facing challenges. The agriculture sector, which employs a significant portion of the population, particularly in rural areas, and contributes to 60 percent of Kenya’s exports, is among the sectors experiencing difficulties. Data from the Kenya Youth Agribusiness Strategy 2017-2022 highlights that 64 percent of unemployed Kenyans are youth between the ages of 18 and 35. Many of them are moving away from agriculture to rapidly growing non-agricultural sectors in urban areas.
Women entrepreneurs encounter various constraints that impede their access to finance and hinder the growth of their businesses. These obstacles include a lack of business management skills, legal and social barriers, policy limitations, limited access to networks and information, and inadequate financing options tailored to their specific needs.
Financial institutions often perceive businesses led by women as risky due to factors such as a scarcity of high-quality assets for collateral and generally smaller business sizes. Consequently, it is crucial to support women entrepreneurs and stimulate private investment in this segment to promote inclusive economic growth in Kenya.
According to the 2017 Economic Survey conducted by the Kenya National Bureau of Statistics, commercial bank lending to the sector accounted for only three percent in 2016. This low figure reflects the perceived high risk associated with this customer segment.
