French development agency Agence Française de Développement's (AFD) funding to Kenya’s private sector jumped six times to €145.73 million (Sh21.87 billion at current exchange rates) last year, easing funding hurdles for local businesses.
Disclosures in the French fund’s 2024 annual report show that the disbursements by Proparco –an AFD subsidiary tasked with investing in the private sector– were a rise from the €22.78 million (Sh3.42 billion) in 2023.
The increased funding was timely in helping ease woes facing small and medium enterprises that have in recent years been grappling with costly loans from banks.
AFD says it will enhance funding to Kenya and other middle-income economies to help small businesses mitigate against current hardships in the short-term.
“Non‑sovereign business will be actively promoted in order to intervene in a differentiated way in countries where the sovereign limit is tangent (Morocco) or in countries constrained by the debt doctrine (Kenya, Cameroon),” AFD says in the disclosures.
AFD is the biggest shareholder of Proparco at 85.21 percent followed by 7.07 percent by international financial institutions, 6.18 percent by French lenders, one percent by investors and 0.53 percent by funds and ethical foundations.
Small and medium enterprises in Kenya have in the past few years grappled with expensive loans from banks, with high interest rates pushing them to default or avoid tapping credit.
Banks charged interest rates at upwards of 15 percent last year, with the rate averaging 17.22 percent as at November last year making it expensive for small firms beset by low sales. The hurdles in accessing credit have forced scores of businesses to shut down or withhold expansion plans.
The number of deals for Kenya’s private sector fell by 84.1 percent last year, with 17 funding deals to Kenya’s private sector approved last year, down from 107 in 2023.
Sierra Leone’s private sector recorded the biggest drop with only one deal approved by Proparco last year, a fall of 94.7 percent from 19 in 2023 while firms in Tunisia posted the second biggest drop of 91.3 percent to two deals from 23 in the same period.
The drop in approved deals for Kenya’s private sector made it the 13th biggest beneficiary in terms of the number of funding agreements last year, down from the third position in 2023.
The jump in the overall disbursements means that Proparco increased the value size of the loans that were issued to Kenya’s private sector last year.
Some of the Proparco’s funding deals that went to Kenya’s private sector last year include a $95 million (Sh12.27 billion at current exchange rates) to KCB Group for onward lending to women-led enterprises and climate-friendly projects. The loan was issued in May last year.
NCBA Group also tapped a $50 million (Sh6.4 billion) loan from Proparco for on-lending to small and medium businesses in March last year.
