The Kenya Investment Mechanism (KIM) is a five-year USAID project that is facilitating $520 million in investment for key sectors of Kenya’s economy, including agriculture, and for regional trade and investment opportunities under the Prosper Africa initiative. The project supports the mobilization of private investment and accelerates enterprise-driven development.
Addressing Market Challenges
KIM addresses two principal market failures that have discouraged investors from financing micro, small, and medium enterprises (MSMEs) in the Kenyan economy: insufficient quality consulting services and limited availability of financial products tailored to these sectors. KIM uses smart incentives to mobilize finance for development in targeted sectors including agriculture (supported by Feed the Future), energy & infrustracture (supported by Power Africa), and women-owned businesses as well as in the health, WASH, and trade sectors.
Capacity Building
KIM builds the capacity of financial institutions (FIs) and business advisory service providers (BASPs) through training and technical assistance to facilitate private finance and investment for the working capital needs of smallholder farmers and MSMEs. This increases the competitiveness and productivity of enterprises working along any link in the target value chains.
Business Enabling Environment
Concurrently, KIM leads policy reform efforts focused on removing barriers inhibiting large-scale investment into these sectors, therefore unlocking further finance. The two objectives result in the project serving as an investment platform that mobilizes substantial capital from the private sector and builds partnerships between stakeholders in the financial ecosystem.
Challenges
Limited knowledge & investment support
Lack of quality consulting services assisting agribusiness and SMEs to obtain financing or become ready for investment
Perceived high barriers to investment
Perception among FIs that the agriculture sector is risky and has high transaction costs
Limited tailored financial products
Lack of available & scalable financial products that are tailored to the targeted sectors
Goals
Mobilize capital for enterprises in Kenya and East Africa
Unlock $520 million in capital for enterprises that meet any one of the following criteria:
- Are active in the agriculture (dairy, livestock, horticulture, or regionally/internationally traded goods), health, or WASH sectors
- Are women-owned or women-led
- Are youth-owned or youth-led
- Are trading with the USA
Improve the business environment through policy reform
Facilitate an enabling environment for private sector financing through policy reform, including investment policies under Kenya’s devolved government.
Capacity building and risk mitigation
- Offer capacity building to partners to deepen their understanding in the importance of value chain financing, while also supporting development of new financial products that better fit the cash collection cycle of businesses.
- Increase utilization rates of USAID’s Development Finance Corporation (DFC) partial guarantee mechanism, thus increasing financing activity of DFC partner institutions into the target value chains.
Some initiatives we support
Financial Institutions
We partner with financial institutions – ranging from commercial banks to microfinance institutions, to non-bank institutions – to move them into underserved markets. Our partnership with financing institutions is based on pay-for-results contracts, where incentives are provided upon lending to the target groups and regions.
Business Advisory Service Providers
We partner with business advisory service providers who offer advisory services to improve business operations, financial modeling, due diligence, and investment readiness (among other things). We support these BASPs with capacity building and connections to sources of financing – debt/equity/blended finance – while providing incentives to help enterprises access capital.
Treasury
We are working with the National Treasury to support SMEs’ access to credit. Our efforts have led to the launch of the Credit Guarantee Scheme rolled out in December to help SMEs recover from the impact of COVID-19, and drive their growth going forward.
Prosper Counties
Through the Prosper Counties initiative, the US government aims to leverage its expertise and relationships to support county-level private sector solutions by investing in Business-to-Business relationships. This initiative contributes to job creation, improves economic growth, and expands tax revenues in Kenya’s secondary cities and rural areas. We support county-led enabling environment initiatives needed to unlock capital for targeted investments. This co-created activity begins with a joint work plan to support policies or regulations reforms that will result in an investment mobilized. The eight counties are Makueni, Kakamega, Nakuru, Mombasa, Kisumu, Isiolo, Kisii and Kiambu and were selected based on high economic potential, effective governance practices, and commitment to create an enabling business environment.
Kenyan Pension Funds Investment Consortium (KEPFIC)
We have partnered with KEPFIC to expand and diversify the investment opportunities for pension funds that support the Kenyan economy through investment in critical sectors, in particular energy, infrastructure, and agriculture. We are supporting KEPFIC’s institutional development and capacity to invest in energy and other infrastructure projects, while developing or capitalizing a fund with other investors to generate landmark transactions.
Snapshot of Our Results
Total Finance Mobilized: $608 M
Mobilized by FIs: $343 M
Mobilized by BASPS: $265 M
To women-owned enterprises: $59 M
To youth-owned enterprises: $14 M
Breakdown by Sectors
Energy: $27 M
Livestock: $98 M
Horticulture: $190 M
Dairy: $109 M
Multi-sectoral: $136 M
Health- $35.5 M
WASH- $13.6 M
Investment Pipeline
Total value of pipeline: $1 Billion
Number of deals in the pipeline: 424
Value of deals under engagement: $586 Million
Number of Prosper Africa Deals in Pipeline: 62
Value of Prosper Africa Deals in the Pipeline: $594 Million
Number of Prosper Africa Deals Closed: 30
Value of Prosper Africa: $221 Million
Other Numbers
Total number of MSMEs supported: 450
Total number of Smallholders supported: 8.8 Million
Our Partners
