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Loans For Start-Ups in Kenya

Money254 Team
February 18, 2022

While it’s true that innovative products and business models are the bedrock of any promising startup, a steady flow of funds, especially in the early stages, to turn those ideas into reality is also critical.

There are several options for funding startups in Kenya that will be detailed below.

Statistics from the Kenya National Bureau of Statistics (KNBS) show that half of small enterprises die within their first year.\

According to Financial Sector Deepening Kenya (FSD Kenya), in 2021, Micro and Small Entrepreneurs (MSEs) accounted for about 24% of Kenya's gross domestic product (GDP), 93% of the labour force in the economy and constitute 90% of all private sector entities. 

With a majority being in the informal sector, only about 15% of the over 7 million micro and small enterprises in Kenya are licensed. This introduces a major start-up funding challenge that severely diminishes the ability of these small businesses to expand. 

Between December 2014 to December 2019, Micro Small and Medium Enterprises (MSMEs) in the informal sector are estimated to have created more than half of total new job opportunities, especially in the low income cadres. In 2019, approximately 768,000 new jobs of the 846,000 thousand created during the year were generated in MSMEs.

What Startup Funding Options are Available in Kenya?

The list is not exhaustive, but it will give you an idea of which institutions to look for when starting a business.

Incubators and Accelerators

These are mostly limited to the Kenyan capital, Nairobi, and they offer mentorship, training, seed funding, and incubation services for budding startups.

Examples include: Nailab, iHub, Afrilab, Chandaria Business Innovation and Incubation Centre, iBiz Africa among others.

A recent example is the Google for Startups Accelerator. This is a 3-5 month program for startup companies working on products or services that advance one or more of the United Nations Sustainable Development Goals (UN SDGs).

The accelerator provides technical support to these companies, along with specialised training and mentorship on SDG partnerships, social impact measurement, leadership, and fundraising.

Google was looking for companies trying to solve some of humanity’s biggest challenges, with the vision for changing the world for the better.

Crowdfunding Platforms

This is the practice of raising money from a large number of people to fund a project or venture typically via online platforms. 

It is contrasted with traditional funding where you raise a large sum of money from a single source e.g. a bank or venture capitalist.

Crowdfunding platforms enable the fundraisers to connect with the ‘crowd’ at a fee. Mostly, the all-or-nothing model of funding is used - whereby if you reach your target, you receive the money, if you don’t all contributors get their money back. 

Crowdfunded money can be paid back with interest, as equity, in the form of rewards, or through a profit sharing model. It can also be a hybrid of the above or as a donation towards a charitable course. 

Examples of crowdfunding platforms include Seedstars, Zidisha and Kickstarter.

Banks, Microfinance Banks and Microfinance Institutions 

These three tend to feed off each other as most entrepreneurs who fail to secure loans from banks usually turn to Microfinance Banks or Microfinance Institutions.

What to consider on whether to get a bank, MFB or MFI business loan ranges from eligibility, interest rates and structure to loan limits and collateral. 

According to the 2021 FinAccess Survey report by the Central Bank of Kenya (CBK), lending to MSMEs generated Ksh70.8 billion for the banking industry, representing 12.2 percent of the total income generated from lending by the banking industry in 2020.

The average interest rate on MSME loans ranged from 10% to 21% in 2020,

with commercial banks and microfinance banks charging averages of 12 and 15.6 % respectively. 

Average interest rates per institutional category were 16.6% for micro enterprises, 12.4% for small enterprises and 12.3% for medium enterprises.

Venture Capital 

A venture capitalist is a private equity investor who provides funding to companies that have a high potential for growth in exchange for percentage ownership. Such companies could be startups or small companies that have demonstrated ability to expand but do not have access to the equity markets such as the Nairobi Securities Exchange (NSE). 

In Kenya, venture capitalists have typically invested in FinTech, agribusiness, healthcare and affordable healthcare, transportation and logistics, renewable energy, and e-commerce.

Examples of venture capitalists available in Kenya include: Factor[e] Ventures, Ingressive Capital, Acumen, Energy Access Ventures, Fanisi Capital among others.

Youth Enterprise Development Fund

This is a state corporation mandated to provide financial and business development support services to youth owned enterprises.

The Fund aims to create job opportunities for young people by encouraging them to be job creators rather than job seekers. It accomplishes this by offering simple and affordable financial and business development assistance to young people interested in starting or expanding businesses.

This fund also offers LPO financing options for youth in Kenya. This loan is available to youth who have been awarded tenders by government agencies (ministries, parastatals, county governments and constitutional commissions) under the AGPO programme, and from other reputable procuring entities not owned by the government (those listed at the NSE and credible NGOs).

Youth can access up to Ksh5 million, with an interest of 1.5% after 90 days. The requirements for such a loan are:

  • Registration with the relevant government body
  • A valid LPO from a qualifying agency 
  • Undertaking by the procuring entity to pay the tender proceeds in favour of Youth Enterprise Development Fund Board.
  • Customer account details

Recently, platforms have also been set up to provide information on companies that are offering themselves up for investment. A good example is Investera Plus Africa, which provides market research, due diligence, investment advisory and financial intelligence services to investors, businesses and entrepreneurs.

Such firms are looking to address challenges associated with raising start-up capital and access to markets, which are some of the biggest hurdles for budding Kenyan entrepreneurs.


Micro enterprise – Any firm with an annual turnover not exceeding Ksh 500,000 and  employing (or rather engaging) 1-9 people. 

The total assets and financial investment or the registered capital of the enterprise does not exceed Ksh.10 million in the manufacturing sector and does not exceed Ksh 5 million in the service and farming sector. 

Small enterprises – Any firm with an annual turnover of between Ksh 500,000 and Ksh 5 

million and engaging 10-49 employees. 

In the manufacturing sector, investment in plant and machinery should be between Ksh 10 million and Ksh 50 million and registered capital of the enterprise between Ksh 5 million and Ksh 25 million in the service and farming sector.

Medium enterprises are firms with between 51-100 employees and a capital investment of not more than Kshs 30 million

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