Nairobi, Kenya – In a significant move to address the financing gap faced by Micro, Small, and Medium Enterprises (MSME) in Kenya, the African Development Bank Group’s Board of Directors has approved a groundbreaking investment of €18 million. The funding aims to support women and youth entrepreneurs engaged in agricultural value chains and boost their participation in the agribusiness sector.
The investment, sanctioned on June 6, 2023, comes as a result of the partnership between the African Development Bank Group and the European Union (EU), which recognizes the vital role played by women and youth in Kenya’s agricultural sector. This collaboration signifies a milestone in implementing the joint initiative and highlights the commitment to empowering underrepresented groups in the country.
Mrs. Nnenna Nwabufo, Director General for East Africa at the Bank Group, emphasized the significance of this approval, stating, “The investment not only strengthens our partnership with the EU but also demonstrates the Bank’s dedication to promoting inclusivity by uplifting women and youth in Kenya’s agribusiness sector.”
The financing intervention is particularly timely due to the prevailing challenges faced by MSMEs exacerbated by the disruptions caused by the Covid-19 pandemic. According to the International Finance Corporation (IFC), Kenya currently grapples with a staggering SME finance gap of US$19.38 billion, equivalent to 30 percent of the country’s GDP. Furthermore, the World Bank’s Covid-19 Business Pulse Survey (BPS) reveals that numerous viable firms continue to struggle, especially in the agriculture sector, which employs a substantial portion of the population and contributes 60 percent of Kenya’s exports.
The situation is further compounded by the growing number of unemployed youth in Kenya, as stated in the Kenya Youth Agribusiness Strategy 2017-2022 report, which indicates that 64 percent of jobless individuals fall between the ages of 18 and 35. Many young Kenyans have been compelled to leave the agricultural sector in search of opportunities in fast-growing non-agricultural sectors within urban areas.
For women entrepreneurs, accessing finance and fostering business growth pose significant challenges. They face various obstacles, including a lack of business management skills, legal and policy barriers, limited access to networks and information, and inadequate financing options tailored to their specific needs. Banks often perceive women-led businesses as risky due to factors such as lower asset quality and quantity for collateral, as well as smaller business sizes. Therefore, supporting and empowering women entrepreneurs while mobilizing private investment in this segment is crucial for promoting inclusive economic growth in Kenya.
Recent statistics from the Kenya National Bureau of Statistics 2017 Economic Survey reveal that commercial bank lending to the agribusiness sector in 2016 accounted for a mere three percent, primarily due to the perceived high risk associated with this customer segment.
The African Development Bank Group’s investment serves as a significant step toward addressing these pressing challenges and empowering women and youth entrepreneurs in the agribusiness sector. By partnering with the European Union, the Bank aims to bridge the financing gap, stimulate economic growth, and unlock the immense potential of Kenya’s agricultural industry.
