Digital and digitally enabled businesses across Kenya will have greater access to capital through new financing solutions introduced by the Co-operative Bank of Kenya in partnership with the United Nations Capital Development Fund (UNCDF).
The financing solutions have been developed under a USD 900,000 Loan Portfolio Guarantee Facility signed between UNCDF and Co-operative Bank of Kenya and announced earlier this year. The facility forms part of Digital Platforms Kenya (DigiKen), a United Nations programme funded by the European Union through the Joint SDG Fund that supports Kenya’s digital transformation.
For many digital and digitally enabled businesses, access to commercial finance remains a significant barrier to growth. Limited collateral, evolving business models and short operating histories can make it difficult for promising enterprises to meet conventional lending requirements. Under the guarantee facility, UNCDF shares a portion of the lending risk with Co-operative Bank, enabling the Bank to extend financing to enterprises that may otherwise struggle to access the capital they need to grow, innovate and create jobs.
The facility provides guarantee coverage of between 50 and 70 per cent of loans extended through the financing solutions, with enhanced coverage of up to 70 per cent available for enterprises operating in Kenya’s Arid and Semi-Arid Lands. The financing can support working capital, business expansion and technology investments across key segments of Kenya’s digital economy, including fintech companies, digital credit providers, e-commerce and digitally enabled MSMEs, as well as digital innovation hubs and ecosystem enablers.
Through the mechanism, DigiKen aims to enable 150 Kenyan micro, small and medium-sized enterprises to secure funding. The mobilized capital is projected to contribute to the creation of 4,500 direct and 20,000 indirect jobs in Kenya’s digital economy, supporting the Government of Kenya’s Digital Superhighway Agenda.
Eng. John Tanui, Principal Secretary, State Department for Information, Communication, Technology and Digital Economy, welcomed the initiative as an important contribution to Kenya’s digital transformation agenda.
“A thriving digital economy depends not only on innovation, but also on access to capital. By de-risking lending and improving access to finance for homegrown digital platforms especially those led by women and youth, we are helping entrepreneurs and MSMEs turn ideas into businesses, strengthen local innovation and accelerate growth of Kenya’s Tech Sector and the Digital Superhighway Agenda.”
For UNCDF, the guarantee demonstrates how risk-sharing mechanisms can help financial institutions reach enterprises that may fall outside traditional lending models.
“Many promising businesses struggle to access financing, not because they lack potential, but because they do not fit traditional lending models. Through this partnership, we are derisking Co-operative Bank of Kenya so it has the confidence to back entrepreneurs who can drive innovation, growth and job creation and access the capital they need to thrive.”
Omon Ukpoma-Olaiya, Regional Investment Team Lead for East and Southern Africa and the Arab States Region, UNCDF
Co-operative Bank of Kenya will manage the financing solutions, translating the guarantee support into financing opportunities for qualifying digital enterprises.
“Kenya's digital economy is creating exciting opportunities for businesses of all sizes, yet many entrepreneurs still struggle to access the financing needed to turn ambition into growth. Through this partnership, we are providing practical financing solutions that will help innovative businesses invest, expand and create jobs while strengthening Kenya's competitiveness in the digital age.”
Dr. Gideon Muriuki, Group Managing Director and Chief Executive Officer, Co-operative Bank of Kenya
Building a wider ecosystem for digital transformation
The new financing solutions are one part of DigiKen’s broader work to strengthen the foundations for an inclusive and sustainable digital economy. Implemented by UNESCO as lead agency, together with UNCDF, UN Women and UNEP, in close coordination with the UN Resident Coordinator’s Office and in partnership with the Ministry of Information, Communications and the Digital Economy, DigiKen brings together government, United Nations agencies, financial institutions and local innovation actors.
At a recent DigiKen Steering Committee meeting in Nairobi, partners reviewed progress across the programme and how its results can be further embedded within national institutions and sustained over time. This includes strengthening public-sector capacities for AI and digital transformation, expanding opportunities for digital enterprises and building local innovation ecosystems that connect people and businesses with skills, mentorship, networks and economic opportunities.
Through UNESCO’s leadership, DigiKen has institutionalized the UNESCO-Oxford Transformative Leadership Course on AI and Digital Transformation in Government within the Kenya School of Government. This is helping embed capacities in digital transformation, AI ethics and data governance within public-sector training. The Government will also work with the Public Service Commission and Kenya School of Government to integrate digital leadership and AI competencies into leadership development and continuous professional development programmes across the public service.
Across the country, DigiKen’s network of Digital Innovation Hubs is bringing another part of this ecosystem closer to communities. The hubs provide access to digital skills through DigiKen Academy alongside entrepreneurship support, mentorship and networks, with particular attention to women, young people and underserved communities. They are developing as local innovation ecosystems where entrepreneurs can connect with knowledge, business support and economic opportunities closer to where they live and work.
The hubs will also help connect entrepreneurs with the new financing opportunities. Over the coming months, Co-operative Bank, UNCDF and DigiKen partners will carry out targeted outreach and capacity-building activities across Kenya’s regional Digital Innovation Hubs, working with local entrepreneurs, technology hubs and industry stakeholders to build awareness and uptake of the financing solutions.
For Dr. Garry Conille, United Nations Resident Coordinator in Kenya, bringing together finance, government and development partners can help widen participation in Kenya’s digital economy.
“For the United Nations, the value of this partnership is about widening who can participate in Kenya’s digital economy. We need to find practical ways to bring opportunity closer to young people, women and entrepreneurs in underserved communities who too often remain outside traditional pathways to finance. DigiKen shows the value the UN can bring by connecting Government, finance and development partners around solutions that turn talent and ideas into viable businesses, jobs and livelihoods.”
As DigiKen moves forward, partners will continue working to strengthen national ownership, expand access to finance and digital opportunities, and build the institutions and local ecosystems needed to sustain Kenya’s digital transformation over time.
Originally published by UNESCO.
Note:
All Joint SDG Fund programmes are led by UN Resident Coordinators and implemented by agencies, funds and programmes of the United Nations development system. The Joint SDG Fund gratefully acknowledges contributions from the European Union and the Governments of Belgium, Denmark, Germany, Ireland, Italy, Luxembourg, Monaco, the Kingdom of the Netherlands, Norway, Poland, Portugal, the Republic of Korea, the Kingdom of Saudi Arabia, Spain, Sweden, Switzerland and the Arab Gulf Programme for Development.
