USAID’s Kenya Investment Mechanism (KIM) Activity has officially hit the USD400 million mark, which was its original target. With 16 months still left in its lifetime, KIM is well on its way to reaching its new target of USD520 million.
“It’s a proud moment for us having shot past our original target of USD 400 million,” says Roger Bird, KIM’s Chief of Party. “We’re most proud because, today, over 15,000 smallholders are accessing credit for growth as a result of KIM’s intervention.”
Over the past 4 years, KIM has mobilised most of its capital toward the agriculture sector, a key contributor to sustainable and inclusive economic growth in Kenya. While the sector contributes about 33 percent of Kenya’s gross domestic product and employs almost 70 percent of the rural population, only about 5 percent of commercial lending goes to agriculture.
Limited customised loan products for farmers, traditional bank screening models, and the perception of the sector as high-risk by financial institutions (FIs) mean that agribusinesses are often cut off from financial services and credit. Access to finance can improve productivity and as a result, farmers’ incomes.
KIM is turning the tide by addressing the market failures that have discouraged investors from financing the agriculture sector and its other target sectors. Through smart incentives and demand-driven technical assistance, KIM has facilitated private finance and investment for agribusinesses and smallholder farmers through a robust network comprised of 20 FIs and 35 business advisory service providers (BASPs), who help SMEs access financing.
“Our success is largely due to the deliberate effort to select strong partners with proven track records,” explains Lukas Barake, KIM’s Monitoring & Evaluation Manager. “Our FI network now includes KCB, Equity Bank, and Co-operative Bank, all tier 1 commercial banks with extensive branch networks and strong financial muscle.”
“Similarly, our BASPs network is comprised of seasoned BASPs who can support large transactions and have a footprint in our target counties.”
KIM also facilitates networking between its partner FIs and BASPs. “The different networking forums, which include pitch sessions, have enabled the BASPs to understand the kind of transactions different FIs are looking for and present transactions directly to the FIs,” adds Barake. “This has resulted in a higher success rate of deals closed in the last year.”
To further enhance its efforts, KIM established strategic partnerships with local partner intermediaries that include large corporates, innovative lead firms, financial institutions, governments, and other development partners. To date, these strategic partnerships have resulted in the mobilisation of USD2.8 million for enterprises within KIM’s target sectors.
“The goal of these partnerships is to unlock capital at an even greater scale by testing innovative business models, reducing the perceived and real risks of financing SMEs in our target sectors, and identifying creative approaches to unlock capital,” adds John Kashangaki, KIM’s Strategic Partnerships Advisor.
KIM’s new target of mobilising USD520 million by August 2023 is an ambitious one. However, based on the current results, KIM is well poised to match and exceed its target. The team hopes that no matter what, KIM will leave behind the legacy of a transformed market and strengthened financial ecosystem that supports the mobilisation of finance and investment for smallholder farmers and small-medium-sized enterprises across Kenya.
As Bird notes, KIM’s real success will be the transformation of the financial ecosystem, resulting in enhanced access to credit for millions of smallholder farmers and SMEs across the region. “Ultimately, our objective is to create a self-sustaining market system that will firmly place East African economies on the path to self-reliance,” he says.