Kenya—Financial Inclusion for Rural Microenterprises (FIRM)

Client: U.S. Agency for International Development

Duration: 2011-2016

Region: Sub-Saharan Africa

Country: Kenya

Solutions: Economic Growth

Kenya’s microfinance sector is internationally recognized due largely to consistent and strategic investment by the U.S. Agency for International Development (USAID) and projects led by DAI, including our Kenya Access to Rural Finance (KARF) project (2007–2010). FIRM built on this work by expanding and innovating financial services in five areas key to Kenyans’ economic well-being: agriculture, renewable and clean energy, information and communication technology, gender and youth, and policy reform. We built the capacity of the commercial sector to deliver customized financial products and services for entrepreneurs and busi­nesses—primarily in rural areas—now starved of the capital they need to grow.

Sample Activities

  • In collaboration with FSD Kenya, a local financial services trust, create the agriculture Value Chain Finance Center (VCFC) to develop appropri­ate and sustainable finance for people and entities tied to agriculture.

  • Train VCFC employees to become industry leaders in Kenya’s financial, agricultural, or related sectors.

  • Develop the Financial Inclusion and Innovation Fund to underwrite costs associated with partnerships encompassing a wide variety of commercial actors in the financial services industry, Government of Kenya agencies and stakeholders, associations, donors, business service providers, and consultants.

  • Continue to manage and grow USAID’s Development Credit Loan Guarantee program in each implementation area.

Select Results

  • Facilitated $1 billion in rural and agricultural loans to 2 million borrowers through partner microfinance institutions and other lenders.

  • Promoted improved technologies used by 1.8 million farmers.

  • Provided technical assistance to 1.7 million members of producer and community-based organizations.

  • Built a portfolio of five clean/renewable energy financing proposals—four hydro and one biomass—totaling $42 million; the first transaction for $7 million—$2 million equity and $5 million debt—closed in December 2016 for a hydropower plant in Nandi county on the Yala River.

  • Developed loan products for three DCA partner financial institutions so they could lend, for the first time ever in Kenya, to water and public utilities and related community-based organizations.

  • Provided consulting support to more than 100 financial institutions and related actors.

  • Supported Kenyan Retirement Benefits Authority to enable pension funds to invest up to 10 percent of their holdings—approximately $500 million—in private equity, representing a new asset class for Kenyan pension funds.

  • Helped five counties turn their County Integrated Development Plans into investment strategies, portfolios, and priorities. For some, FIRM developed energy asset maps and agriculture asset maps to add more detail for potential investors. The five counties identified more than $1 billion in investment-grade opportunities. Ultimately, each county won commitments from investors, worth a collective $100 million for projects in potato and fish processing, small-scale and bulk water, and irrigation.

  • In the first phase of KARF, DAI helped build the Develop­ment Credit Loan Guarantee program into one of USAID’s top-performing portfolios through partnerships with commercial banks and deposit-taking microfinance institutions in areas such as small and medium-sized enterprise finance, credit unions, water, micro-health insurance, and agriculture. All told, more than $100 million in new lending was attributable to KARF through its Kenyan partners.

  • KARF also pilot-tested a new quantitative agri­culture value chain finance research methodol­ogy that won widespread acceptance from the financial sector and donor community. After KARF helped the Central Bank of Kenya pass the Deposit-Taking Microfinance Bill and, later, built the regulator’s capacity to implement the new bill, the Central Bank requested further assistance from KARF in policy reform areas, including agency and branchless banking, credit reference bureaus, risk-based microfinance supervision, anti-money laundering, and crisis management.

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