Rural Investment Instruments

The RK-FINFA will operate with two rural investment instruments:

• a Rural Credit Guarantee Scheme (R-CGS)
• a Green Financing Facility (GFF).
  
  

Both the R-CGS and the GFF will be designed as sustainable financing vehicles, which can utilize resources from the GoK and from interested international financiers to unlock private investment into Kenya’s agricultural and agribusiness sector at attractive market terms through Kenyan financial institutions. The Technical Support and Innovation Services packages under Component 1 will support the PFIs in the implementation of the rural investment instruments, in line with each PFI’s respective rural and agriculture finance strategy. Identification and referral of agribusiness and smallholder candidates into the PFI funding pipelines are supported as described in sub component 1.2 under the technical support and innovation services.

Sub-component 2.1: Rural Credit Guarantee Scheme (R-CGS)

The strategy of the R-CGS is to provide risk sharing to promote rural outreach innovations and catalyze funding from Kenyan mainstream financial institutions into the rural and agriculture sector. The expected results of the R-CGS are:

• supported by the R-CGS guarantee amount of US$ 20 million, PFIs lend US$ 80 million to rural MSMEs and agriculture value chains;  2,000 rural MSMEs have improved access to finance;
• 15,000 microenterprises and farmers have improved access to finance, including women and youth-owned enterprises,
• 30,000 smallholder farmers have improved access to finance with targeted products for women and youth, and
• in overall the target of 30 percent women and youth among end-client groups is achieved.

Sub-component 2.2: Green Financing Facility

This sub-component supports the target of the innovative and sustainable transformation of Kenyan rural economy through the operations and services of the Green Financing Facility (GFF), established with the RK-FINFA support. The GFF will contribute to the sustainable rural transformation, growth, and income generation through two fully interlinked methods:

• alleviating the liquidity constraints of non-bank financial institutions that are the main financial service providers to smallholders and rural micro-enterprises, and
• encouraging small-scale farmers and micro-firms to invest in climate-smart and environmentally friendly activities while promoting gender-equitable access to finance.

The GFF initial investment by RK-FINFA is US$ 20 million and it is expected to reach out to about 30,000 rural households through micro and small-scale loans. The GFF will be established as a permanent facility at a selected Host Financial Institution to provide wholesale capital to rurally oriented SACCOs and MFBs/MFIs, for on-lending to the smallholder sub-sector and rural micro-enterprises, targeting 50 percent women and 30 percent youth.