How European Investments Bank Supports SMEs In Kenya

By Soko Directory Team / Published July 2, 2024 | 2:16 pm



European Investment Bank

Kenya thrives on the wheels of Small and Medium Enterprises (SMEs). About 90 percent of businesses in Kenya are SMEs that employ about 86 percent of the population and contribute about 45 percent to Kenya’s gross domestic product (GDP).

Even though SMEs are the backbone of Kenya’s economy, they still face a myriad of challenges that have brought millions of them to their knees. Stats from the Kenya National Bureau of Statistics (KNBS) indicated that at least 450,000 SMEs close in Kenya annually translating to 30,000 a month and 1,000 daily on average.

One of the challenges faced by SMEs in Kenya is the inability to access credit from commercial banks. This is because most banks in Kenya require SMEs to give them security before acquiring a loan. Most SMEs do not have security that they can deposit with a bank as collateral and in some cases, the cost of credit can be very high.

Another challenge is the high cost of doing business in Kenya. This, coupled with higher taxes has made it almost impossible for businesses to operate and remain afloat. Many of them have had to shut down operations as a result, never to resume again.

Read Also: European Investment Bank Sets Up A New Hub In Nairobi

The coming of Covid-19 pandemic dealt a major blow to a great many SMEs in Kenya. Millions of people lost their jobs and many businesses were shut down as they failed to adapt to the fast-changing times that had been necessitated by the pandemic.

To help SMEs in Kenya survive, the European International Bank (EIB), which is the European Union Bank, partnered with local banks in Kenya through an intermediated lending framework. This included working with banks that are popular with SMEs such as Co-operative Bank and Equity Bank. Since these banks know their customers well and have worked with them for many years, they were better placed to organize loan allocation and careful investment.

Intermediated lending means a local bank, or other financial institution, takes out a loan from a larger institution like the EIB and then lends this money to small businesses in its area of operation. The credit lines are targeted at the EU’s priority areas of intervention in a particular country, to maximize their impact. In certain operations, the EIB blends the credit lines with EU grants to develop affordable financing solutions and technical assistance for the final beneficiaries and partner banks. This helps ensure that businesses can be sustainable in the long term.

“Access to finance is crucial for MSMEs to support their growth and in difficult times even to sustain their business,” said Edward Claessen, Head of EIB Regional Hub for Eastern Africa. “The loans that are provided have enabled local banks to pass on favorable terms including longer tenures and affordable interest rates to the MSMEs here. They must sustain their business, to grow their business, and to create sustainable jobs.”

Ronald Omwenga runs a flower pot shop. His shop was among the few businesses that boomed during the Covid-19 pandemic. Given that many people had more free time, the majority beautified their homes and planted flowers.

“During Covid and even after, people had time to do some planting of flowers and the rest. We had to look for a financial partner to enable us to meet the demands of the market in terms of these flower pots,” said Mr. Ronald Omwenga, the CEO of The Pot Shop. His business received EIB financing support through Co-operative Bank.

Another beneficiary was Dr. Anthony Kinyanjui, the Medical Officer in charge of Equity Afia, Donholm. He was one of the entrepreneurs who benefited from affordable capital injection from the European Investment Bank through its partnership with Equity Bank. Through the finances he received, he increased the network of his clinics and employed more people.

“Some of the obstacles that we have been encountering is access to capital. Equity Bank has been able to educate us on different options that are there for financing our business. When the opportunity to benefit from the EIB facility came, it came in handy. So we have been able to expand to every estate in Eastlands,” Dr. Kinyanjui said.

Read Also: European Investment Bank: Supporting SMEs To Bridge The Gap Towards Equitable Access To Health In Kenya




About Soko Directory Team

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system.Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

View other posts by Soko Directory Team


More Articles From This Author








Trending Stories










Other Related Articles










SOKO DIRECTORY & FINANCIAL GUIDE



ARCHIVES

2024
  • January 2024 (238)
  • February 2024 (227)
  • March 2024 (190)
  • April 2024 (133)
  • May 2024 (157)
  • June 2024 (145)
  • July 2024 (107)
  • 2023
  • January 2023 (182)
  • February 2023 (203)
  • March 2023 (322)
  • April 2023 (298)
  • May 2023 (268)
  • June 2023 (214)
  • July 2023 (212)
  • August 2023 (257)
  • September 2023 (237)
  • October 2023 (264)
  • November 2023 (286)
  • December 2023 (177)
  • 2022
  • January 2022 (293)
  • February 2022 (329)
  • March 2022 (358)
  • April 2022 (292)
  • May 2022 (271)
  • June 2022 (232)
  • July 2022 (278)
  • August 2022 (253)
  • September 2022 (246)
  • October 2022 (196)
  • November 2022 (232)
  • December 2022 (167)
  • 2021
  • January 2021 (182)
  • February 2021 (227)
  • March 2021 (325)
  • April 2021 (259)
  • May 2021 (285)
  • June 2021 (272)
  • July 2021 (277)
  • August 2021 (232)
  • September 2021 (271)
  • October 2021 (305)
  • November 2021 (364)
  • December 2021 (249)
  • 2020
  • January 2020 (272)
  • February 2020 (310)
  • March 2020 (390)
  • April 2020 (321)
  • May 2020 (335)
  • June 2020 (327)
  • July 2020 (333)
  • August 2020 (276)
  • September 2020 (214)
  • October 2020 (233)
  • November 2020 (242)
  • December 2020 (187)
  • 2019
  • January 2019 (251)
  • February 2019 (215)
  • March 2019 (283)
  • April 2019 (254)
  • May 2019 (269)
  • June 2019 (249)
  • July 2019 (335)
  • August 2019 (293)
  • September 2019 (306)
  • October 2019 (313)
  • November 2019 (362)
  • December 2019 (318)
  • 2018
  • January 2018 (291)
  • February 2018 (213)
  • March 2018 (275)
  • April 2018 (223)
  • May 2018 (235)
  • June 2018 (176)
  • July 2018 (256)
  • August 2018 (247)
  • September 2018 (255)
  • October 2018 (282)
  • November 2018 (282)
  • December 2018 (184)
  • 2017
  • January 2017 (183)
  • February 2017 (194)
  • March 2017 (207)
  • April 2017 (104)
  • May 2017 (169)
  • June 2017 (205)
  • July 2017 (189)
  • August 2017 (195)
  • September 2017 (186)
  • October 2017 (235)
  • November 2017 (253)
  • December 2017 (266)
  • 2016
  • January 2016 (164)
  • February 2016 (165)
  • March 2016 (189)
  • April 2016 (143)
  • May 2016 (245)
  • June 2016 (182)
  • July 2016 (271)
  • August 2016 (247)
  • September 2016 (233)
  • October 2016 (191)
  • November 2016 (243)
  • December 2016 (153)
  • 2015
  • January 2015 (1)
  • February 2015 (4)
  • March 2015 (164)
  • April 2015 (107)
  • May 2015 (116)
  • June 2015 (119)
  • July 2015 (145)
  • August 2015 (157)
  • September 2015 (186)
  • October 2015 (169)
  • November 2015 (173)
  • December 2015 (205)
  • 2014
  • March 2014 (2)
  • 2013
  • March 2013 (10)
  • June 2013 (1)
  • 2012
  • March 2012 (7)
  • April 2012 (15)
  • May 2012 (1)
  • July 2012 (1)
  • August 2012 (4)
  • October 2012 (2)
  • November 2012 (2)
  • December 2012 (1)
  • 2011
    2010
    2009
    2008
    2007
    2006
    2005
    2004
    2003
    2002
    2001
    2000
    1999
    1998
    1997
    1996
    1995
    1994
    1993
    1992
    1991
    1990
    1989
    1988
    1987
    1986
    1985
    1984
    1983
    1982
    1981
    1980
    1979
    1978
    1977
    1976
    1975
    1974
    1973
    1972
    1971
    1970
    1969
    1968
    1967
    1966
    1965
    1964
    1963
    1962
    1961
    1960
    1959
    1958
    1957
    1956
    1955
    1954
    1953
    1952
    1951
    1950