AfDB Approves Over €19m To Support Kenyan Women, Youth In Agribusiness

Posted by Eric Ojo Business News, Latest Headlines Tuesday, June 27th, 2023

(AFRICAN EXAMINER) – African Development Bank (AfDB) Group has approved an equity investment of €18 million in the Africa Guarantee Fund (AGF) and another €1.2 million to support youth and women entrepreneurs engaged in agricultural value chains in Kenya.

AGF is a private limited liability pan-African non-bank financial institution headquartered in Nairobi, Kenya. Its objective is to boost Small and Medium Enterprises (SMEs) in terms of access to finance and capacity development, thereby increasing employment and reducing poverty.

The total share capital amounts to $225 million, with investments from the German state-owned investment and development bank, KfW (28.74 percent); Danish Investment Fund for Developing Countries and DANIDA) (33.52 percent); Spanish Ministry of Foreign Affairs and Cooperation (9.31 percent).

Others are the AfDB Group (9.3 percent); Nordic Development Fund (7.96 percent); French Development Agency, AFD (6.51 percent); and Proparco (4.65 percent).

Since its inception, AGF has cumulatively issued $1.56 billion of guarantees to 189 Partner Financial Institutions (PFIs) in 40 African countries.

This particular funding was provided by the European Union (EU) under its partnership with the AfDB Group.

The demand for Micro, Small, and Medium Enterprises (MSME) financing remains unmet in Kenya and has been aggravated by the disruptions of the Covid-19 pandemic. The International Finance Corporation (IFC) estimates an SME finance gap of US$19.38 billion, representing 30 percent of the country’s Gross Domestic Product (GDP).

Similarly, World Bank’s Covid-19 Business Pulse Survey (BPS) shows that many potentially viable firms are still struggling. The agriculture sector employs the largest share of the population, especially in rural areas, and accounts for 60 percent of Kenya’s export.

According to data by the Kenya Youth Agribusiness Strategy 2017-2022, 64 percent of the unemployed Kenyans are youth (18 to 35 years old), with the majority moving away from agriculture to fast-growing non-agricultural sectors in urban areas.

AfDB’s Group Director General for East Africa, Mrs. Nnenna Nwabufo said the approval as “another milestone in the implementation of the partnership with the EU, which also signals the importance given to the role of women and youth in the agricultural sector in Kenya”.

Women face many constraints hampering their access to finance and the growth of their businesses. These include a lack of business management skills, legal, social, and policy barriers, poor access to networks and information, and inadequate financing options catering for their specific needs.

Banks often perceive women-led businesses as risky due to the low quality or number of assets for collateral and the generally smaller business sizes. Therefore, supporting women entrepreneurs and catalyzing private investment in this segment are crucial measures to foster inclusive economic growth in Kenya.

According to the 2017 Economic Survey by the Kenya National Bureau of Statistics, commercial bank lending to the sector in 2016 stood at a mere three percent, as the risk level of this customer segment is deemed high.