How the European Investment Bank Gave Hope To SMEs In Kenya After The Covid-19 Pandemic

By Soko Directory Team / Published August 2, 2024 | 7:10 am

The Covid-19 pandemic was a historical event that sent shockwaves across the globe. It was a time of unprecedented fear and uncertainty, as millions of lives were lost, and countless businesses shuttered. Nations closed their borders, and the hope of a swift return to normalcy seemed to fade away. In Kenya, the pandemic’s impact was particularly severe.

Beyond the loss of lives, the country’s small businesses, the backbone of its economy, faced unparalleled devastation. Hundreds if not thousands of SMEs were forced to close their doors or drastically scale down operations, and the usual bustling activity ground to a halt. The once-thriving customer base dwindled, and unemployment rates soared, reaching unprecedented levels.

Amidst this chaos and economic turmoil, the European Investment Bank (EIB), the financial arm of the European Union, stepped in with a lifeline. Recognizing the urgent need to support the struggling SMEs, the EIB intensified its strategic alliances with local banks in Kenya, employing an innovative intermediated lending framework designed to help these small businesses regain their footing.

This collaborative effort, which had been nurtured over several years, included partnerships with well-established banks such as Co-operative Bank and Equity Bank. These institutions had a deep-rooted relationship with SMEs that they serve and an acute understanding of their unique financial needs. The intermediated lending model involved these local banks receiving credit lines from the EIB, which they would then lend to small businesses within their operational areas. This system ensured that the financial support was channeled directly to where it was needed most, targeting the in-need SMEs for maximum impact.

The EIB’s approach went beyond merely providing credit lines to their local banking partners. In many instances, these credit lines were supplemented with EU grants, creating more affordable financing solutions than the market was offering at the time and offering technical assistance as well as advisory services to both the end beneficiaries and the partner banks. This holistic strategy aimed to guarantee the long-term sustainability of the businesses, ensuring they could not only survive the pandemic but also thrive in its aftermath.

Edward Claessen, Head of the EIB Regional Hub for Eastern Africa, underscored the critical importance of this access to finance for micro, small, and medium-sized enterprises (MSMEs). “Access to finance is crucial for MSMEs to support their growth and, in difficult times, even to sustain their business,” he remarked. “The loans provided have enabled local banks to offer favorable terms, including longer repayment periods and affordable interest rates, to MSMEs. This support is essential for them to sustain their business, foster growth, and create sustainable jobs.”

One compelling success story comes from Ronald Omwenga, the CEO of The Pot Shop, a flourishing flower pot business. During the pandemic, as people found themselves with more time at home, there was a surge in interest in home beautification and gardening. “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,” Ronald explained. Through the EIB financing support provided via Co-operative Bank, Ronald’s business was able to scale up its operations and meet the increased market demand. The financial backing allowed him to expand his inventory, improve his supply chain, create more employment opportunities, and ultimately, grow his customer base.

The story of Ronald Omwenga is just one among many, illustrating how the EIB’s intermediated lending and strategic partnerships with local banks provided a crucial lifeline to Kenyan SMEs during the pandemic. This collaborative effort not only helped these businesses survive the crisis but also positioned them for future growth and sustainability.

By offering affordable financing, technical assistance, and a robust support system, the EIB and its local partners played a vital role in revitalizing Kenya’s SME sector, ensuring that these businesses could once again become the engines of economic growth and job creation.

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

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