France commits Ksh. 283B to East Africa SME financing
Published on: March 14, 2019 05:37 (EAT)
PROPARCO — a Development Financial Institution partly-owned by the French Development Agency and private shareholders — has committed a total of Ksh.283 billion (2.5 billion euro) towards the financing of micro, small and medium enterprises (MSMEs) in East Africa. The funding to be advanced through a combination of equity, debt and guarantees is targeted at serving close to 10,000 regional enterprises with the aim of scaling up the entities to become regional power players. A partly Ksh.113 billion (1 billion euro) of the funds will be injected directly into firms with the Ksh. 170 billion (1.5 billion euro) balance being advanced indirectly as credit through partner financial institutions. “This is the face of entrepreneurship in Africa. We are aware of the country’s many possibilities. Innovations such as M-Pesa have not only created plenty of jobs but have in their wake taken on board so many startups,” French Minister for Europe and Foreign Affairs Jean-Yves Le Drian highlighted East Africa’s SME growth potential. The French support will extend to beyond just financing to include the professional facilitation of the units which underscores the multiplicity of challenges facing Africa’s largest employment generator. “The very purpose of this initiative is to have an all inclusive and integrated approach towards the SME ecosystem to include measures such as technical assistance and training in governance to accompany the financial support,” said PROPARCO Regional Head for East Africa Jean-Benoit Du CHALARD. SMEs are the largest employers in Kenya contributing to nearly 40 percent of Gross Domestic Product (GDP). However, 87 percent of the micro-units lie outside the formal sector to miss out on credit through the traditional channels, largely controlled by commercial lending, according to the Trade and Industry Ministry. PROPARCO has had a presence in Kenya and East Africa since 1997, facilitating in its stay, credit access to a wide variety of entities of players in the local economy to include investments in agriculture, health, education and renewable energy. Kenya is the largest beneficiary to the private equity financing, receiving the lion share of proceeds from the initiative to the tune of nearly 50 percent. The PE firm will invest a total of Ksh.18 billion (160 million euro) in the first phase of the capital advancement to East African SMEs with the balance being disbursed in the period running to the close of 2022. The announcement of the SME financing deal coincides with the close of French president Emmanuel Macron’s two-day visit which has in itself yielded a further Ksh. 270 billion (USD 2.65 billion) in public-private infrastructure pacts to include the construction of a commuter railway line between the Jomo Kenyatta International Airport (JKIA) and the Nairobi Central Business District (CBD) to ease traffic congestion.