UK Mobilises Further Finance to Lower Cost of Borrowing For Kenyan SMEs

NAIROBI, Kenya —The British High Commission in Nairobi has unveiled a USD $5.2 million (KSH 667 million) fund aimed at providing affordable credit to Kenyan micro, small, and medium enterprises (MSMEs).

Known as the “Listed SME Debt Fund,” this initiative spearheaded by FSD Africa seeks to mobilize up to USD $300 million (KSH 38.85 billion) in sustainable finance for local businesses, a majority of which will be sourced from domestic investors.

This fund aims to meet the funding needs of at least 10,000 MSMEs across diverse sectors in Kenya, supporting businesses ranging from small-scale artisans to finance professionals and agricultural producers.

Organizers expect the fund to support 50,000 households, create and sustain over 89,000 jobs, and enhance access to essential services for more than 200,000 Kenyans.

Beyond a direct boost to businesses, the fund seeks to address Kenya’s prohibitively high lending rates, which reach up to 40 percent in some cases, making it difficult for local businesses to expand and increase hiring.

British High Commissioner Neil Wigan, commenting on the fund’s potential impact, noted, “We must lower the cost of borrowing for Kenyans. This fund will deliver for all the hardworking hustlers of this country—especially women, young people, and persons with disabilities—who are often pushed to the economic margins.”

The fund’s structure offers a unique investment opportunity for Kenyan institutional investors, particularly pension funds that currently manage assets exceeding USD $30 billion.

Although regulations allow them to invest up to 30 percent in alternative assets, many funds have yet to diversify into the SME sector.

This fund is expected to help de-risk these investments, providing a more stable and lucrative option for Kenyan investors while supporting the country’s economic growth.

FSD Africa, a UK-funded financial development institution, made the announcement at a regional capital markets conference.

Its CEO, Mark Napier, emphasized the significant impact that SMEs, which make up nearly 98 percent of Kenyan businesses, have on employment.

“This fund will provide affordable credit to businesses that have long struggled to secure financing, boosting local employment and enabling growth across borders,” Napier said.

This initiative underscores the UK’s commitment to enhancing Kenya’s financial ecosystem, providing long-term growth opportunities, and reinforcing the UK-Kenya partnership.

The first fundraising close is anticipated to bring in USD $100 million, setting the stage for expanded financial access for Kenyan businesses seeking to scale.

With SMEs contributing an estimated 24 percent of Kenya’s GDP and providing about 14 million jobs, this fund has the potential to play a transformative role in the country’s economic landscape, driving both innovation and resilience in Kenya’s critical SME sector.