UK launches Ksh.667M SME support fund to fuel economic growth in Kenya

This fund, led by FSD Africa and fully supported by the UK government, is expected to raise up to $300 million (Ksh 38.85 billion) in sustainable finance, providing affordable credit options for SMEs and catalysing growth and employment throughout the country.

The Listed SME Debt Fund will primarily seek investment from Kenyan institutional investors, such as pension funds, with an initial fundraising target of $100 million.

The fund's goal is to help over 10,000 MSMEs, protect or create more than 89,000 jobs, and improve access to essential services for over 200,000 people.

This initiative is in line with Kenya's economic objectives and demonstrates the UK's commitment to promoting long-term economic resilience and growth.

Kenyan SMEs face high borrowing costs, with interest rates of up to 40%, limiting their growth potential and job creation.

The Listed SME Debt Fund will provide affordable credit to Kenyan business owners, improving access to capital across a wide range of industries, from agriculture and manufacturing to financial services.

By making financing more accessible, the fund is expected to boost local business and drive economic development across the country.

Neil Wigan, the British High Commissioner to Kenya, emphasised the UK's commitment to lowering borrowing costs for Kenyans.

"This fund strengthens the UK’s investment toolkit in Kenya and supports job creation and economic growth, especially for those often on the economic margins, including women, youth, and persons with disabilities," he stated.

The Listed SME Debt Fund is designed to attract domestic institutional investors, particularly pension funds, which manage more than $30 billion in assets.

Regulatory approvals allow pension funds to invest up to 30% in alternative assets, but few have taken full advantage of the opportunity.

The SME fund introduces a new asset class, allowing Kenyan investors to diversify their portfolios while supporting local businesses and stabilising the economy.

Mark Napier, CEO of FSD Africa, emphasised the importance of SMEs, which account for 98% of Kenyan businesses and contribute approximately 24% of the country's GDP.

 "This fund will provide affordable credit to businesses that have historically struggled to access financing. It offers MSMEs the opportunity to grow across borders, support local employment, and drive Kenya’s economic transformation," Napier said.