NAIROBI, Kenya, Aug 18 – Players in the Small and Medium Enterprise sector have received a shot in the arm following the launch of a Sh15 billion private equity fund.
The Fusion African Access fund, which is managed by Fusion Capital, will go towards equity financing for SME businesses in the East African region.
Fusion Capital Chief Executive Officer Luke Kinoti said on Thursday that the fund provides a vital link between capital and investment opportunities that exist in the region, in an effort to unlock the full potential of the sector in driving economic growth.
“We are keen on developing the SME sector in Kenya and in the East African region because of its vibrancy and contribution to the economy. We will provide the link they need between capital and places to invest,” Mr Kinoti said.
The SME sector is viewed as a crucial cog in economic growth in Kenya. It contributes about 18 percent of the country’s gross domestic product and employs approximately 75 percent of the workforce.
However, financing challenges have slowed down further growth of businesses in this segment and transition into blue-chip companies.
Mr Kinoti said that as part of the firm’s strategy, they would be providing technical assistance to boost the business growth.
“We realise that even in the best conditions, without dedication and commitment, the true potential of any business will remain unrealised with unmotivated leadership,” he said.
The government has also been making inroads in supporting the small and medium enterprise sector. The Treasury has rolled the first tranche of the Sh3.8 billion SME revolving fund totalling Sh900 million.
The government wanted banks to match every shilling put into the fund with five shillings. SMEs have a high risk profile, which makes it difficult for them to access traditional sources of credit and finance.
Fusion Capital Chairman Dr Phil Goodwin said the East African markets provide an ideal investment hub for international investors given its relative stability compared to most other African markets.
“East Africa brings together countries that are stable, have an educated workforce, risk taking entrepreneurs and are business minded which is ideal for any investors looking to come in,” Dr Goodwin.
Mr Kinoti added that the firm would also be looking to improve corporate governance in SMEs in a bid to make it possible for the business to list on the Nairobi Stock Exchange once the window is formulated.
“Listing at the bourse provides a platform for SMEs to raise capital and an opportunity for us to exit the business,” he said.