Family Bank Secures Ksh 2.6 Billion from BII to Fuel Kenyan SME Growth and Women’s Empowerment

In a significant boost for Kenya’s vibrant but often underserved business landscape, Family Bank has announced it has secured a Ksh 2.6 billion (approximately $20 million USD) trade finance facility from the British International Investment (BII). This crucial injection of capital is specifically earmarked to expand lending to Kenyan businesses, with a keen focus on Small and Medium-sized Enterprises (SMEs), women-led businesses, and the vital agribusiness sector. The aim is to ease access to much-needed credit for thousands of Kenyan entrepreneurs and traders who frequently grapple with challenges such as foreign exchange shortages and tough economic conditions.

The partnership underscores a shared commitment to fostering inclusive economic growth and addressing key financial barriers that have historically hindered the expansion of these critical segments of the Kenyan economy. Family Bank, a prominent player in Kenya’s financial sector, is strategically leveraging this facility to accelerate its five-year growth strategy, which centers on deepening its SME lending portfolio and closing existing credit access gaps in Kenya’s dynamic markets.

Unpacking the Ksh 2.6 Billion Trade Finance Facility

This substantial funding comes in the form of a trade finance facility, a specialized financial instrument designed to facilitate international and domestic trade transactions. Unlike conventional loans, trade finance focuses on financing the trade cycle itself, providing capital and mitigating risks involved in buying and selling goods or services. This makes it particularly suitable for businesses engaged in import and export, or those with complex supply chains.

What is Trade Finance?

Trade finance essentially bridges the gap between the time an exporter wishes to be paid and the time an importer is able to pay. It provides the necessary credit, payment guarantees, and insurance to ensure that transactions proceed smoothly. Key benefits for businesses include:

• Improved Cash Flow: It unlocks working capital tied up in inventory or receivables.
• Risk Mitigation: It reduces payment and supply risks for both buyers and sellers.
• Access to Larger Orders: It allows businesses, especially smaller ones, to undertake larger orders than their balance sheets might otherwise permit, as the underlying goods often serve as collateral.
• Competitive Terms: It enables businesses to offer more competitive payment terms to their suppliers and customers.

For Kenyan SMEs and agribusinesses, access to such a facility is paramount, especially in an environment marked by foreign currency liquidity constraints. These constraints directly hamper their ability to access affordable financing for imports (e.g., raw materials, machinery) and to transact seamlessly in international markets. The BII facility, by providing access to foreign exchange, directly addresses this critical bottleneck, enabling businesses to procure necessary inputs and engage more effectively in global trade.

The Strategic Focus: SMEs, Women-Led Businesses, and Agribusiness

Family Bank’s strategic allocation of these funds reflects a deep understanding of Kenya’s economic priorities and the segments with the highest potential for impact.

Empowering Micro, Small, and Medium-sized Enterprises (MSMEs)

MSMEs are the backbone of the Kenyan economy, contributing significantly to both Gross Domestic Product (GDP) and employment. According to the Kenya National Bureau of Statistics (KNBS), MSMEs account for over 90% of all businesses in Kenya and employ the vast majority of the working population, estimated at approximately 14.9 million Kenyans. Despite their colossal contribution, these enterprises consistently face severe challenges, particularly in accessing capital and managing liquidity.

Challenges faced by Kenyan SMEs include:

• Limited Access to Finance: Traditional banks often perceive SMEs as high-risk due to a lack of creditworthiness information, insufficient collateral, and informal operational structures.
• High Cost of Credit: Even when financing is available, interest rates can be prohibitive, making loans expensive and less attractive.
• Foreign Exchange Shortages: For businesses involved in international trade, scarcity of foreign currency complicates imports of raw materials or machinery, disrupting supply chains and increasing operational costs.
• Lack of Financial Literacy: Many entrepreneurs, while innovative, may lack the formal financial management skills needed to secure and effectively utilize loans.

The BII facility directly targets these issues by providing Family Bank with the capacity to offer tailored trade finance solutions that can mitigate some of these risks, making credit more accessible and affordable for SMEs.

Championing Women-Led Businesses: The 2X Challenge

A significant aspect of this funding arrangement is its qualification as a 2X Challenge-qualified investment. This global benchmark recognizes initiatives that actively empower women as business leaders, entrepreneurs, employees, and consumers in developing countries. The 2X Challenge is a collective commitment by public and private investors to mobilize capital for gender-smart investments.

For a project to be 2X Challenge-qualified, it must meet specific criteria related to women’s economic empowerment, such as:

• Women’s Leadership: Businesses owned or led by women.
• Quality Employment for Women: Providing fair wages, good working conditions, and opportunities for career advancement for female employees.
• Access to Finance: Providing financial products and services specifically tailored to women entrepreneurs.
• Enterprise Support: Offering business development services, mentorship, and training to women-owned or led businesses.
• Products and Services that Benefit Women: Developing solutions that enhance women’s economic participation or improve their lives.

In Kenya, while a high percentage of women are engaged in entrepreneurial activities, their businesses often struggle with sustainability and growth. A recent report by Mastercard indicated that 93% of Kenyan women consider starting or running their own businesses, far higher than the regional average. However, they face significant hurdles, with lack of funding (53%) being the biggest reason for their struggles, followed by lack of financial resources (44%) and difficulty in securing startup capital. This facility, by specifically targeting women-led businesses, aims to dismantle these barriers, providing them with the capital and support needed to thrive, innovate, and contribute more robustly to the economy.

Boosting Agribusiness: Feeding the Nation and Driving Exports

Agriculture is the bedrock of Kenya’s economy, contributing approximately 30% of the Gross Domestic Product (GDP) directly and another 27% indirectly through linkages with other sectors. It employs over 40% of the total population and more than 70% of Kenya’s rural populace. The sector is also a major source of export earnings and provides most of the country’s food requirements.

The BII facility will support agribusinesses operating across various segments of the agricultural value chain, including:

• Agricultural Production: Funding for farmers to acquire inputs, improve farming techniques, and enhance yields.
• Processing: Investment in facilities that add value to raw agricultural produce.
• Logistics and Infrastructure: Support for cold chains, transport, and storage facilities that reduce post-harvest losses and improve market access.
• Other Value Chain Areas: Including inputs, distribution, and market linkages.

Agribusinesses in Kenya face unique challenges, such as vulnerability to climate change (droughts, floods), fluctuating commodity prices, limited access to modern farming technologies, and inadequate market infrastructure. By providing targeted trade finance, Family Bank can help these businesses overcome these hurdles, improve productivity, enhance food security, and boost agricultural exports, which are vital for Kenya’s foreign exchange earnings.

Family Bank’s Vision: Accelerating Growth and Deepening Impact

Family Bank’s CEO, Nancy Njau, articulated how this partnership aligns perfectly with the bank’s strategic objectives. “SMEs in Kenya continue to grapple with foreign currency liquidity constraints, which hamper their ability to access affordable financing and transact seamlessly,” she stated. “With SMEs forming over 80 percent of our customer base, it is crucial for us to roll out innovative, friendly, and cost-effective ways of doing business.”

This financing from BII is set to significantly accelerate Family Bank’s five-year growth strategy. The bank aims to:

• Scale SME Lending: Substantially increase its loan portfolio dedicated to SMEs.
• Deepen Sector-Specific Support: Provide tailored financial solutions that cater to the unique needs of various sectors, including agribusiness.
• Close Credit Access Gaps: Reach businesses that have traditionally been underserved by formal financial institutions, particularly women-led enterprises and those in rural areas.

Family Bank has a rich history in Kenya, having been founded in 1984 as Family Finance Building Society Limited and converting to a fully-fledged commercial bank in 2007. It is currently the fourth-largest bank in Kenya in terms of geographical reach, with 95 branches in 32 counties and over 1.2 million customers. The bank has been a pioneer in digital innovation, introducing paperless banking through smart card technology and its PesaPap mobile app. This digital prowess, combined with its extensive branch network, positions Family Bank well to effectively disburse and manage the BII facility, ensuring its reach to a wide array of businesses.

BII’s Commitment: Unlocking Structural Barriers for Inclusive Transformation

The British International Investment’s decision to partner with Family Bank is a clear demonstration of its commitment to supporting inclusive economic transformation in Kenya. BII, the UK’s Development Finance Institution, focuses on investing to create more productive, sustainable, and inclusive economies in Africa, Asia, and the Caribbean. Their strategy in Kenya, as outlined by their re-established presence, involves pursuing investment opportunities that will raise productivity, help increase climate resilience, and ensure inclusive opportunities for all.

BII recognizes that working with local financial institutions like Family Bank is a highly effective way to achieve its development mandate. Local banks possess invaluable market knowledge, established networks, and the capacity to reach segments of the economy that international investors might find challenging to access directly. By channeling funds through Family Bank, BII can help unlock structural barriers that prevent MSMEs from thriving, including:

• Limited Access to Foreign Exchange: Directly addressed by the nature of the trade finance facility.
• Gender Biases in Lending Practices: The 2X Challenge qualification ensures that the facility actively promotes gender equality in finance, pushing for more equitable lending to women entrepreneurs.

This investment aligns seamlessly with broader national development agendas, particularly Kenya’s Vision 2030 and the current administration’s Bottom-Up Economic Transformation Agenda (BETA).

Kenya Vision 2030 and BETA Alignment

Kenya Vision 2030 is the country’s long-term development blueprint, aiming to transform Kenya into a newly industrializing middle-income country providing a high quality of life to all its citizens by 2030. It is built on three pillars: Economic, Social, and Political. The economic pillar specifically targets an average GDP growth rate of 10% per annum and identifies key sectors like agriculture, trade, manufacturing, and financial services as growth drivers. The support for SMEs and agribusiness directly contributes to these economic objectives.

The current administration’s Bottom-Up Economic Transformation Agenda (BETA) is a strategic initiative aligned with Vision 2030, focusing on enhancing livelihoods at the grassroots level. BETA emphasizes five key pillars, two of which are directly supported by this BII facility:

1. Agricultural Transformation and Inclusive Growth: Providing finance to agribusinesses directly supports this pillar.
2. Transforming the Micro, Small and Medium Enterprise (MSME) Economy: Easing credit access for SMEs is central to this objective.

By investing in these critical areas, BII is not just providing capital; it is actively contributing to Kenya’s national development goals, fostering a more inclusive and resilient economy.

The Broader Macroeconomic Context and Financial Inclusion

Kenya’s economy, like many others globally, has navigated a period of significant macroeconomic challenges. While the Kenya National Bureau of Statistics (KNBS) reported a Q1 2025 GDP growth of 4.9% and an inflation rate of 3.8% in June 2025, businesses continue to face headwinds.

Navigating Economic Headwinds

• Inflation: While inflation has shown signs of moderating, persistent price pressures can erode purchasing power and increase operational costs for businesses.
• Exchange Rate Fluctuations: The Kenyan Shilling has experienced volatility against major international currencies, leading to uncertainty for importers and exporters. Forex shortages can make it difficult for businesses to settle international payments.
• Interest Rates: The Central Bank of Kenya (CBK), responsible for formulating monetary policy to achieve price stability and foster a stable financial system, sets the benchmark interest rate. While Family Bank recently lowered its lending rates, the overall cost of credit remains a concern for many SMEs.

In this context, a trade finance facility like the one from BII is not merely an additional source of funds but a strategic tool for economic resilience. It provides a stable and predictable source of foreign currency, helping businesses to manage their import costs and engage in international trade more confidently, thereby mitigating some of the risks associated with currency fluctuations.

Advancing Financial Inclusion

Beyond direct economic benefits, this partnership significantly advances financial inclusion in Kenya. Financial inclusion refers to the access and usage of affordable, useful, and responsible financial products and services. By targeting SMEs, women-led businesses, and agribusinesses, many of which are underserved by traditional finance, the facility helps to bring more economic actors into the formal financial system.

Increased financial inclusion leads to:

• Poverty Reduction: By enabling individuals and small businesses to save, borrow, and invest, it creates pathways out of poverty.
• Economic Empowerment: It gives marginalized groups, particularly women, greater control over their financial lives and business decisions.
• Formalization of the Economy: As more businesses access formal credit, they are more likely to formalize their operations, contributing to tax revenues and better economic data.

The CBK’s mandate includes fostering the liquidity, solvency, and proper functioning of a stable market-based financial system. By supporting banks like Family Bank in expanding credit to key sectors, the CBK’s broader objective of a robust and inclusive financial sector is reinforced.

Conclusion: A Catalyst for Sustainable and Inclusive Growth

Family Bank’s acquisition of the Ksh 2.6 billion trade finance facility from British International Investment marks a pivotal moment for Kenya’s economic trajectory. This strategic partnership is more than just a financial transaction; it’s a powerful commitment to empowering the very segments of the economy that hold the key to sustainable and inclusive growth: SMEs, women-led businesses, and agribusinesses.

By directly addressing critical challenges such as foreign currency shortages and limited access to affordable credit, the facility will unlock new opportunities for thousands of entrepreneurs. It will enable businesses to expand, create jobs, contribute to food security, and enhance Kenya’s position in regional and global trade. Furthermore, its alignment with the 2X Challenge ensures that this investment actively promotes gender equality, fostering a more equitable and dynamic business environment for women.

As Kenya continues to pursue its Vision 2030 goals and implement the Bottom-Up Economic Transformation Agenda, partnerships like this one will be indispensable. They demonstrate the power of collaborative finance in transforming economic potential into tangible prosperity, building a more resilient, inclusive, and thriving future for all Kenyans.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

31st July, 2025