The UK government, through the British High Commission in Nairobi, has committed KSH 667 million ($5.2 million) to establish a fund aimed at expanding access to financing for small and medium-sized enterprises (SMEs) in Kenya. Spearheaded by FSD Africa, a development finance institution funded by the UK government, 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 encourage both domestic and international investors to participate in Kenya’s SME sector, ultimately promoting economic growth and job creation.
The fund is designed to provide affordable credit to a range of Kenyan businesses by offering reduced interest rates, which currently reach as high as 40% for SMEs. The high borrowing costs have posed a significant barrier for businesses across industries, particularly for smaller enterprises. The debt fund, listed and managed in Kenya, will make it easier for local pension funds and other institutional investors to invest in the SME sector, benefiting their own portfolios while fostering a stronger local economy.
An initial $100 million round is planned, targeting $240 million from Kenyan institutional investors, with the remaining $60 million expected to come from international investors. The overall goal is to support around 10,000 SMEs, help 50,000 households, and generate nearly 90,000 jobs. Additionally, the fund’s broad sectoral scope means it can support a variety of businesses, from agriculture to manufacturing to technology, lowering the cost of capital for Kenya’s diverse entrepreneurs.
British High Commissioner Neil Wigan emphasized the importance of fostering an inclusive economic environment in Kenya. He noted that the UK’s efforts to lower borrowing costs would aid “the hardworking hustlers of this country,” including young people, women, and persons with disabilities who often face financial exclusion.
In addition to supporting economic development, this fund presents an appealing investment opportunity for Kenyan pension funds and institutions seeking alternative assets. Kenyan pension funds alone manage more than $30 billion but have traditionally under-invested in alternative assets, despite regulatory allowances. With FSD Africa’s Listed SME Debt Fund, these funds have a new path to diversify their portfolios, offering stable returns while reducing the risks typically associated with SME lending.
FSD Africa’s CEO, Mark Napier, highlighted the role of SMEs in Kenya’s economy, noting that small and medium businesses make up 98% of enterprises and account for a significant share of the country’s employment. He emphasized that expanding credit access to SMEs will support these vital engines of job creation, helping Kenya’s economy become more inclusive and resilient. Napier expressed confidence that the fund would open doors for more SMEs to grow and expand internationally, creating economic opportunities for communities across Kenya.
