As Kenya’s private sector continues to anchor the nation’s economic growth, access to affordable finance remains a pressing challenge for many small and medium-sized enterprises (SMEs).
According to the Kenya National Bureau of Statistics (KNBS), at least 450,000 SMEs close in Kenya annually translating to 30,000 a month and 1,000 daily on average.
Access to affordable and long-term credit has been named as the main challenge leading to these closures. This is because traditional lenders, including commercial banks, require high collateral, which majority of SMEs and startups simply do not have and in some cases, the cost of credit can be very high.
Additionally, the high cost of doing business coupled with higher taxes has made it almost impossible for Kenyan SMEs to operate and remain afloat.
Private capital is emerging as a powerful driver of development in Africa since the public sector alone cannot provide the capital needed to meet demand. This is why the European Investment Bank (EIB) has stepped in through its intermediated lending framework to help Kenyan SMEs survive.
Through the framework, EIB provides credit lines to local banks to then on lend to SMEs or invests in local private equity and venture capital funds enabling them to in turn invest in businesses by taking on some equity in the businesses, without the requirement of quick repayment.
Recently, the EIB set up a unique initiative called Boost Africa, a joint venture between African Development Bank and the European Investment Bank with support from the European Commission.
Deployed in 2020, Boost Africa, is designed to empower young African entrepreneurs especially youth and women by unlocking early-stage financing through venture capital or private equity funds operation in Africa and strengthening technical capacity within Africa’s business ecosystems so that business can grow sustainably into the future.
Beyond capital, Boost Africa’s support frequently includes technical assistance helping partner fund managers improve their fundraising and equipping entrepreneurs to design inclusive products, become investor ready, and facilitating business networks or advisory services.
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How entrepreneurs can access EIB-backed funding
Entrepreneurs looking to scale their businesses an access EIB support through the following ways:
- Via Venture Capital and Private Equity Funds
Since the 1990s, the EIB has been at the forefront in helping bridge the venture-capital gap for early-stage and growth-oriented companies across sub-Saharan Africa. The lender’s support involves financing local private equity and venture capital funds which in turn invest in high-growth potential enterprises and startups in Africa.
In Kenya, Boost Africa works with funds like Seedstars Africa Ventures, TLcom, Atlantica, and AfricInvest to support enterprises active in sectors like ICT, healthcare, climate-tech, agriculture, education, financial services, and manufacturing.
Under the first phase of the Boost Africa initiative, the EIB has invested EUR 78 million in six African funds, which in turn helped mobilise EUR 382 million from other investors into these six funds.
Over 70 companies across Africa have benefited from capital injection and technical assistance training, and the number is set to surpass 120 companies by the end of the investment period. This is creating thousands of jobs for Africa’s youth.
- Through Local Partner Banks and Financial Institutions
The EIB channels most of its SME financing through Kenyan banks and microfinance institutions. Entrepreneurs seeking funding can approach partner banks such as KCB Group, Co-operative Bank, and Family Bank, which manage EIB credit lines.
These facilities often offer longer loan tenors, lower interest rates, and flexible repayment terms tailored to SMEs across sectors such as manufacturing, agribusiness, technology, and renewable energy.
- Green and Climate Finance Opportunities
The EIB is one of the world’s largest financiers of climate action. Kenyan businesses pursuing renewable energy, energy efficiency, waste management, or sustainable agriculture projects can access green finance
4. Digital and Innovation Hubs
For start-ups in the digital economy, the EIB backed P.E funds partner with innovation accelerators offering technical assistance and seed funding opportunities. These hubs often host calls for proposals or pitch events where entrepreneurs can showcase their solutions to investors.
Requirements and Eligibility
Boost Africa has zeroed in on technology-enabled ventures across high-growth sectors. Its priorities include fintech, logistics and supply chain, ICT, edtech, healthtech, and agritech.
While each funding window has its own criteria, the Boost Africa Lead for Kenya, Astou Dia, says that enterprises that stand out for the support are those with a clear value proposition and market fit, strong, committed founding team, potential for scale and cross-border growth, and those open to mentorship and capacity-building and aligned with Environmental and Social Governance and impact principles.
Enterprises must also be legally incorporated and operating in Sub-Saharan Africa, with at least one branch in the region.
“Requests for support goes through a formal process: self-assessment by the beneficiary and the fund manager, review of the assessment, EIB approval, and deployment of expert consultants,” Dia explains.
The lender says the demand for its services is rising and is now looking for ways to extend its support for high-growth enterprises in Kenya and across Africa as the current phase of Boost Africa nears its end.
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