This archive report was first published on 8 July 2019.
On July 8, 2019, the Kenyan Treasury announced the launch of the Biashara Kenya Fund, a new initiative aimed at providing loans to women, youth, and small business owners at a 6% interest rate.
The fund, which will receive Sh2 billion to start operations, is expected to merge the Uwezo Fund, Youth Enterprise Development Fund (YEF), and Women Enterprise Fund (WEF).
According to the Treasury, the interest rate of 6% is significantly lower than the prevailing commercial lending rate of 13%, which was capped by the Central Bank in September 2016.
Private sector credit growth has been sluggish since the government capped commercial lending rates, leading to a private credit squeeze, with banks saying they are forced to cut back on loans to high-risk groups like women, youth, and small and medium enterprise (SMEs).
Under the Biashara Fund, financial intermediaries such as commercial banks and Saccos will be able to lend money to women, youth, and small business owners at a maximum rate of 10%.
Additionally, the fund will lend money to commercial banks at an annual interest rate of 3%, while intermediaries who provide counterpart funding will repay a minimum interest of 1%.
The rules also cap the maximum amount that banks or financial intermediaries can advance a single borrower at Sh3 million.
Applicants must be part of a registered group where at least 70% of the members are aged between 18 and 35 years, and must prove that they have established businesses.
