What is the Financial Inclusion for Rural Microenterprises program?
Financial Inclusion for Rural Microenterprises is a USAID and Government of Kenya partnership designed to expand and deliver innovative financial services to small businesses and entrepreneurs, including lending for projects in agriculture, renewable and clean energy, information and communication technology, gender and youth, and policy reform. The project offers training, research and analysis, and consulting to the financial services industry in Kenya to develop and deliver products and services aimed at people who are not traditionally served by the financial system.
Project Duration and Budget
January 2011 – December 2015
Who Implements Financial Inclusion for Rural Microenterprises?
Development Alternatives, Inc.
Where Does the Financial Inclusion for Rural Microenterprises Program Work?
Nationwide throughout Kenya
What Does the Financial Inclusion for Rural Microenterprises Program do?
In partnership with the financial services industry, Government of Kenya agencies, stakeholders, donors, and private sector consultants, the program designs sustainable financial services models that promote agriculture-led economic growth, improve livelihoods, and contribute to overcoming food insecurity. The program has provided strategic assistance to more than 40 institutions covering the private sector (financial and non-financial), government and industry associations.
The Financial Inclusion for Rural Microenterprises program facilitates USAID’s Development Credit Authority partnerships with Kenyan financial institutions. USAID Kenya has one of the largest Development Credit Authority programs sharing the risk with Kenyan financial institutions for approximately $65 million in loans to rural microenterprises.
The program supports the Central Bank of Kenya, Ministry of Finance, and the Office of the President to develop and promulgate policy reforms. The program has partnered with the Ministry of Finance to design a consumer protection framework in partnership with the Ministry of Finance and is advising the Government of Kenya on creating an entity similar to the Small Business Administration in the United States.
The program has assisted the Central Bank of Kenya in adopting international best practices.
How Is Financial Inclusion for Rural Microenterprises Making a Difference?
Sustainable financial services models designed by the Financial Inclusion for Rural Microenterprises program have reduced poverty among smallholder farmers and rural populations. More than 58,000 individuals and small businesses previously lacking access to financial services have tapped into loans valued at $253 million thanks to innovative financial products and loan guarantees mobilized by the program.
Commercial financing for tea tree farmers in Mt. Kenya region, which was facilitated by the Financial Inclusion for Rural Microenterprises program, has enabled Kenya to enter the global market for tea tree oil.
What key challenges does Financial Inclusion for Rural Microenterprises face?
Inflation and high interest rates adversely affect lending practices. Many of Kenya’s financial institutions lack the structure to finance high-risk business opportunities, and financial institutions are reluctant to enter new sectors.
Changing perception and practices within Kenya’s financial institutions is a long and complex process requiring multiple levels of acceptance before new product development can take place.
For more information:
Gaukhar Serikbayeva, Activity Manager
Agriculture, Business and Environment Office
Tel: +254 208 622 432
Mark Rostal, Chief of Party
Financial Inclusion for Rural Microenterprises Program
Tel: +254 (0)20.214.9879
Geoffrey Otieno,Communications Coordinator
Financial Inclusion for Rural Microenterprises Program Tel: +254 (0)736 137 684
The Financial Inclusion for Rural Microenterprises program in action
Financial institutions in Kenya want to grow and diversify their business. USAID’s Financial Inclusion for Rural Microenterprises Program was approached by Kenya Commercial Bank (KCB), the country’s largest commercial bank, to develop a comprehensive strategy to finance Kenya’s agriculture sector. The program worked with the bank to implement an agriculture strategy focused initially on dairy.
To gain buy-in from the bank’s leadership, the program partnered with KCB middle management to secure approval from their CEO and Board of Directors.
The Financial Inclusion for Rural Microenterprises Program trained bank representatives from 32 branches of KCB in three loan products: herd improvement, asset finance (including refrigeration and transportation), and creation of agriculture deposit accounts.
The program then supported KCB in a pilot program that placed full-time technical support in three locations clustered around the 32 branches: Githunguri (Central), Nakuru (southern Rift Valley), and Eldoret (northern Rift Valley and Western).
Within the first six months, KCB lent $2 million across the three loan products with a strong and growing pipeline.
With increasing pressure on KCB to expand beyond the initial 32 branches, the program is now supporting a model branch for KCB in each cluster. The prototypes serve as training locations for KCB to train new agriculture loan officers.
*Updated February 2013
Last updated: February 26, 2013