The International Finance Corporation (IFC) has launched its first transactions in Africa under the Catalytic First Loss Guarantee (CFLG) Program, unlocking a new financing pathway for Kenyan entrepreneurs through partnerships with 4G Capital, Equity Bank Kenya, and KCB Bank Kenya Limited.
The initiative is expected to catalyze approximately $144.4 million equivalent in local currency lending to microenterprises, women-owned businesses, and climate-focused enterprises across Kenya.
Under the program, IFC has committed $24.2 million across three transactions, supported by $11 million in financing from the International Development Association’s Private Sector Window (IDA PSW). The transactions are expected to mobilize approximately $120.2 million in additional lending to micro, small, and medium enterprises (MSMEs).
The CFLG Program is delivered under IFC’s $4 billion MSME Platform and enables the global development institution to provide first-loss coverage to partner financial institutions through blended finance structures. The mechanism is designed to reduce lending risks for financial institutions and expand credit access for businesses that have traditionally faced challenges securing affordable financing.
The three transactions are expected to achieve a leverage ratio of 11:1, meaning each dollar of first-loss capital will support approximately $11 in financing for small businesses.
Kenya’s MSME Financing Gap
MSMEs account for approximately 90 percent of all businesses in Kenya and provide employment to more than 15 million people. However, limited access to affordable credit remains a major challenge, with the MSME financing gap estimated at nearly 21 percent of the country’s GDP.
The financing constraints have affected small businesses’ ability to expand operations, create jobs, improve productivity, and invest in climate-resilient initiatives.
“Small businesses are the backbone of Kenya’s economy, creating jobs, generating income, and driving innovation in communities across the country. Through these partnerships, IFC is helping expand access to finance for entrepreneurs who have traditionally been underserved by the financial system,” said Mary Porter Peschka, IFC Division Director for Eastern Africa.
She added that the risk-sharing structure under the Catalytic First Loss Guarantee Program would help unlock capital for businesses to grow, strengthen resilience, and contribute to inclusive and sustainable economic growth.
IFC Partners With 4G Capital, Equity Bank and KCB
The transaction with 4G Capital marks a new partnership between IFC and the Kenyan fintech lender, expanding IFC’s engagement with digital financial service providers to increase access to credit.
4G Capital provides working capital financing to micro and small businesses, particularly businesses that face difficulties accessing traditional banking services.
“We are delighted to receive this support from the IFC. The biggest challenge for micro and small businesses is access to working capital – particularly for women-owned enterprises,” said Julian Mitchell, Chief Executive Officer of 4G Capital.
Mitchell said the facility would enable the company to expand its lending reach beyond the $1.2 billion already disbursed and the 1.4 million jobs it has helped create.
The CFLG transactions also deepen IFC’s existing partnerships with Equity Group and KCB Group, which have worked with the institution for nearly two decades to strengthen Kenya’s financial sector and expand lending to underserved businesses.
Moses Nyabanda, Managing Director of Equity Bank (Kenya) Limited, said the partnership would support the bank’s efforts to provide financing to entrepreneurs who have previously been excluded from formal credit systems.
“This partnership with IFC goes to the heart of Equity Bank (Kenya) Limited’s purpose – transforming lives by giving Kenyans the tools to grow,” Nyabanda said.
He added that the initiative supports Equity Bank’s Africa Recovery and Resilience Plan, through which the bank has committed $6 billion to finance five million businesses and 25 million individuals across the region.
KCB Bank Kenya Managing Director Annastacia Kimtai said the partnership would help expand access to affordable credit for businesses facing financing constraints, including women-led enterprises and climate-focused businesses.
“By leveraging this innovative risk-sharing mechanism, we will extend more capital to entrepreneurs, enabling them to scale their businesses and contribute to Kenya’s sustainable economic transformation,” Kimtai said.
IFC to Support MSME Financing Capacity
Beyond providing financing support, IFC will continue working with participating financial institutions to strengthen their ability to serve MSMEs and expand access to sustainable financing solutions.
The program forms part of IFC’s efforts to support private sector growth, entrepreneurship, and access to finance for small businesses across Kenya.
Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.