Co-op Bank, UNCDF launch: The facility, introduced under the Digital Platforms Kenya (DigiKen) Programme, is backed by a USD 900,000 loan portfolio guarantee, equivalent to approximately Sh116.6 million, with a maximum portfolio value of USD 1.8 million, or about Sh233.1 million.
The initiative targets businesses operating in key areas of Kenya’s digital economy, including fintech, digital credit, e-commerce and digitally enabled micro, small and medium enterprises (MSMEs).
Four Digital Economy Segments Targeted
The financing facility will support four main categories of businesses.
These include FinTech companies, Digital Credit Providers, e-commerce and digitally enabled MSMEs, as well as Digital Innovation Hubs and ecosystem enablers.
Through the partnership, Co-op Bank has developed financing products intended to support working capital requirements, business expansion and investments in technology.
The facility is designed to address financing constraints that can limit the ability of technology-focused businesses to expand their operations, invest in innovation and create employment.
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UNCDF to Share Credit Risk
A key component of the facility is the credit-risk sharing mechanism provided by UNCDF.
UNCDF will absorb 50 per cent of the outstanding principal on eligible loans extended by Co-op Bank to qualifying digital businesses.
The coverage will rise to 70 per cent for eligible borrowers operating in Kenya’s Arid and Semi-Arid Lands (ASALs).
Co-op Bank will continue to originate, assess and manage the loans.
The guarantee is intended to enable the bank to extend financing to high-potential businesses that may face difficulties meeting conventional collateral or credit-history requirements.
Focus on Underserved Businesses
The facility is also expected to improve access to finance for businesses operating outside traditional financing channels.
The programme places particular emphasis on expanding opportunities for youth- and women-led enterprises and businesses in underserved communities.
By sharing part of the lending risk, the partnership seeks to create greater room for financial institutions to finance businesses whose growth potential may not be fully captured by conventional lending models.
Co-op Bank: Financing Gap Remains a Challenge
Dr. Gideon Muriuki, Group Managing Director and Chief Executive Officer of Co-op Bank, said the facility responds to a financing gap affecting digital entrepreneurs.
He said the partnership would provide financing solutions to help innovative businesses invest, expand and create jobs while strengthening Kenya’s competitiveness in the digital economy.
The initiative comes as technology continues to influence how Kenyan businesses access customers, deliver services, process payments and manage operations.
UNCDF Seeks to Expand Lending Opportunities
Omon Ukpoma-Olaiya, Regional Investment Team Lead for East and Southern Africa and the Arab States Region at UNCDF, said the facility would help financial institutions reconsider traditional approaches to assessing business opportunities.
According to UNCDF, some businesses with growth potential struggle to obtain financing because they do not fit conventional lending models.
The credit guarantee is intended to help unlock capital for entrepreneurs operating in sectors with potential for innovation, economic growth and employment creation.
Government Welcomes Digital Economy Financing
Eng. John Tanui, Principal Secretary in the State Department for ICT and Digital Economy, welcomed the initiative as part of Kenya’s broader digital transformation agenda.
He said improving access to financing would help entrepreneurs and MSMEs convert ideas into businesses, strengthen local innovation and support the country’s digital transformation objectives.
The financing facility therefore links access to capital with the wider development of Kenya’s digital economy.
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Part of the DigiKen Programme
The financing initiative forms part of the broader Digital Platforms Kenya (DigiKen) Programme.
The programme is implemented by UNESCO as the lead agency, alongside UNCDF, UN Women and UNEP, in coordination with the UN Resident Coordinator’s Office.
The programme is being implemented in partnership with the Ministry of Information, Communications and the Digital Economy, with support from the Joint SDG Fund.
The new Co-op Bank facility represents one component of broader efforts to strengthen Kenya’s digital entrepreneurship ecosystem.
Financing Could Support Digital Transformation
The facility is expected to increase access to finance for digital enterprises and MSMEs, support investment in technology and accelerate digital transformation across different sectors of the economy.
For entrepreneurs, access to appropriate financing can determine the ability of a business to move from an early-stage operation to a scalable enterprise.
The risk-sharing structure between UNCDF and Co-op Bank is designed to address one part of that challenge by reducing the lender’s exposure on qualifying loans.
The facility was announced ahead of the 81st United Nations General Assembly High-Level Week, highlighting the growing focus on financing mechanisms that can support inclusive digital economic growth.
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