USAID’s Kenya Investment Mechanism (KIM) has launched a new collaboration with Vital Capital to support agribusinesses in Kenya affected by the COVID-19 pandemic.

Managed by Palladium, KIM aims to unlock USD 400 million in investments for key sectors of Kenya’s economy, with the aim to pull small and medium-sized enterprises (SMEs) into competitive and growth-focused value chains. The objective is to foster sustainable and inclusive economic growth in Kenya.

“COVID-19 continues to threaten livelihoods and food security in Kenya, where they’re facing the worst locust infestation in 70 years and are still recovering from devastating flooding,” explains Erin Endean, Palladium Vice President of Economic Growth. Over a quarter of households are suffering from food shortages and in May, the Central Bank of Kenya warned that 75% of the country’s SMEs face potential collapse without funding from banks or equity partners.

KIM and impact investment firm Vital Capital will collaborate to identify opportunities in KIM’s pipeline, with a focus on agriculture as a key sector of Kenya’s economy. The ultimate goal of the partnership is to identify and execute at least five completed transactions, providing USD 5 million in total financing, sustaining 500 jobs, and alleviating the strain of COVID-19 on Kenyan businesses.

The engine of Kenya’s economy

In recent years, small and medium sized businesses have contributed to boosting the Kenyan economy, creating jobs, fostering innovation, and supporting local artisans, but they face significant challenges.

“Injecting capital into the Kenyan economy at such a crucial time – when bank lending is sharply down – has an outsized impact. It helps preserve jobs and livelihoods,” says Endean.

Palladium's Preeth Gowdar agrees: “KIM’s focus on the resilience of agribusinesses is critically important post-COVID – this is when essential services must be strengthened,” he says. “SMEs are the engine of Kenya’s economy. KIM’s efforts to mobilize capital into the broader SME sector will fuel future growth, create jobs, and improve food security.”

Vital Capital has been a long-time investor in the region, and for Managing Partner, Nimrod Gerber, a partnership with Palladium and USAID was a natural choice.

“KIM’s goals are closely aligned with our own and we have a shared vision for the economic development of the agricultural sector in Kenya,” he says. “We believe this collaboration has the potential to effect real change and support smallholder farmers to survive the worst ravages of the COVID-related economic crisis.”

The collaboration follows the launch in April of Vital Capital’s Vital Impact Relief Facility, a USD 10 million emergency loan to offer funding to promising African businesses facing the economic consequences of COVID-19, 50% of which will be dedicated to Kenya.

The Feed the Future Kenya Investment Mechanism (KIM) is a five-year program funded by USAID and implemented by Palladium. See the press release for more information on the partnership between KIM and Vital Capital.