When you visit Nancy Nyambura’s dairy business in Eastlands, in Nairobi, it would not be easy to tell how far she has come. The business is a beehive of activities with customers coming in and out, and orders and supplies going out. “I am the founder and director of Animal World Feeds, an agribusiness distributorship that specializes in the distribution of animal feeds such as dairy meal and chicken feeds,” says Nyambura.

She started her business in Nairobi in 2002 as a small-scale farmer. “I lived in the Donholm area. I was a small-scale urban farmer,” she says. To sustain her farming venture in an urban setting, Nyambura relied heavily on dairy feeds which were only accessible at good prices at factory in the Industrial Area. “My biggest challenge was traveling all the way to the Industrial Area to buy dairy feeds,” she says. “I would walk from Donholm to the Industrial Area, which is a distance of about 4 kilometres. After buying my dairy feeds, I would hire someone to carry them to my place using a bicycle. This was an extra cost.”

Along the way, she began to wonder how many more urban farmers were struggling with access to affordable farm feeds as she was. “My struggle turned into my eureka moment. It was clear that there was a market gap for dairy feeds in Nairobi that was not receiving adequate supply,” she says.

Nyambura decided to open an animal feed shop in the Kayole area, in the larger Eastlands area of Nairobi. “I would source for my stock on wholesale from Unga Feeds Limited in the Industrial Area,” she says. Her business began to grow and she became a noticeable, regular customer at Unga Feeds.

“After operating for a while, Unga Feeds Limited got curious about my business. They wanted to know more about how I operated my animal feed in Kayole. They came to visit my business and during this visit, I pitched to them that I was willing to become their main distributor in the larger Eastlands area,” says Nyambura.

Read More: EIB unlocking development in Kenya with financing for small businesses

Unga Limited agreed but the conditions that Nyambura needed to meet to qualify as their main distributor were too high. She needed to have at least three trucks and a bank guarantee of Sh. 1 million.

“I approached the Co-operative Bank where I had been banking and shared my proposal to Unga and the predicament I was in based on their stringent requirements.” The bank agreed to step in and help her meet the requirements.

“They told me they would extend financing to my business based on a partnership they had with the European Investment Bank and true to their word, a financing package was processed within a week, and I started my new phase of business as a distributor,” says Nyambura.

This loan package was heaven-sent for Nyambura’s business. Incidentally, Nyambura’s business blossomed when the Covid-19 pandemic struck. “Every other business closed down as the pandemic spread. People retreated to their homes and there was a huge demand for chickens. The trickle effect was a high demand for chicken feeds whose supply we had in plenty,” she speaks on her break-even point.

As she continues to expand her distributorship business, Nyambura points out to the critical funding that she received as the turning point for her business. “My business broke even in 2021 after I received this funding. Without this funding, I would probably not have broken even” she says.

How did she access it? An evaluation by Bizna Kenya shows that Nyambura’s business was one of many that received financial support from the European Investment Bank (EIB) through its partnership with local banks such as the Co-operative Bank. For instance, in 2021, the EIB extended Sh. 7.2 billion (EUR 50 million) to the Co-operative Bank for onward lending to small businesses to help them recover from the economic impact of the Covid-19 pandemic.

Interestingly, this support of small and medium businesses by the European Investment Bank has been running for many years across the African market, with Kenyan SMEs being a major beneficiary. For instance, in the 2023 financial year, the EIB provided Sh. 444.8 billion (EUR 3.2 billion) for public and private investment across the continent. Out of this amount, Sh. 152.9 billion (EUR 1.1 billion) went into supporting the private sector.

In Kenya, the EIB has invested over Sh. 222.4 billion (EUR 1.6 billion) in different projects over the years. Of this amount, close to Sh. 97 billion (EUR 700 million) has been for support to Small and Medium Enterprises such as Animal World Feeds through intermediated lending to local banks such as the Co-operative Bank.

With intermediated lending, the EIB provides loans to financial institutions which subsequently “on-lend” to final beneficiaries. The EIB, in partnership with the European Union, can offer favourable terms like longer tenures and more favourable terms to the local banks it partners with. The banks are then expected to pass those favourable terms on to SMEs. This support improves access to finance and financing conditions for SMEs.

The financing support that EIB extended to small businesses during the COVID pandemic came in handy at a time when businesses were confronted with multi-layered challenges including constrained access to credit, political instabilities and uncertainties, and changes in risk pricing parameters.

Even Governments that could not access capital on the international market turned to domestic borrowing leading to high levels of crowding out of the private sector, whereby banks choose to put their money in public debt rather than lend to micro, small and medium businesses. They were considered risky, even though they contribute to more than one-third of GDP and more than half of direct formal employment amongst developing countries.

According to Japheth Waweru, an economist and financial markets analyst, this type of financing by the EIB is especially a lifeline for small businesses in the country because of its flexible nature, longer tenures and attractive pricing.

“MSMEs in the country currently constitute 98 per cent of all businesses. They also create over 80 per cent of all new jobs annually and effectively employ over 15,000,000 Kenyans. This shows that any financing that the European Investment Bank extends to this sector is not only tangible for individual business owners, but it also comes with the growth effect where a business can realistically break even or expand,” he says.