World Bank unlocks $144 million for Kenya’s SMEs in its first Africa risk-sharing program

World Bank Group, through its private sector investment arm, International Finance Corporation (IFC), has launched its first transactions in Africa under its Catalytic First Loss Guarantee (CFLG) Program, unlocking a new financing channel expected to mobilize about $144.4 million in local currency lending for Kenya’s small businesses.

The initiative, executed through partnerships with 4G Capital, Equity Bank Kenya, and KCB Bank Kenya Limited, targets microenterprises, women-owned businesses, and climate-focused firms, expanding access to credit and supporting job creation in one of Africa’s most dynamic economies.

How the CFLG program works

The CFLG, part of IFC’s $4 billion MSME Platform, enables the institution to absorb initial losses on loans extended by partner financial institutions. By leveraging blended finance from the International Development Association’s Private Sector Window (IDA PSW), the structure reduces risk for lenders and encourages greater credit flow to underserved segments.

IFC has committed $24.2 million across the three Kenyan transactions, supported by $11 million in IDA PSW funding. This is expected to mobilize an additional $120.2 million in lending to micro, small and medium enterprises (MSMEs), implying a leverage ratio of roughly 11:1, meaning each dollar of first-loss capital could unlock about $11 in financing.

Closing Kenya’s SME financing gap

MSMEs dominate Kenya’s economic landscape, accounting for approximately 90% of businesses and employing more than 15 million people. Yet access to credit remains constrained, with the financing gap estimated at nearly 21% of GDP.

By de-risking lending, the CFLG program aims to bridge this gap, enabling small businesses to scale operations, invest in productivity, and adopt climate-resilient practices.

“Small businesses are the backbone of Kenya’s economy,” said Mary Porter Peschka, IFC Division Director for Eastern Africa. “By sharing risk, we are unlocking capital that helps entrepreneurs grow, strengthen resilience, and contribute to inclusive and sustainable growth.”

Strengthening fintech and banking partnerships

The transaction with 4G Capital marks a new collaboration between IFC and one of Kenya’s leading fintech lenders, underscoring a push toward digital financial inclusion. At the same time, the program deepens IFC’s long-standing partnerships with Equity Bank and KCB Group, built over nearly two decades.

4G Capital CEO Julian Mitchell said the facility would accelerate lending to underserved entrepreneurs, particularly women-owned businesses, noting that access to working capital remains a critical constraint.

Equity Bank Kenya Managing Director Moses Nyabanda added that the guarantee aligns with the bank’s Africa Recovery and Resilience Plan, which aims to deploy $6 billion to support 5 million businesses and 25 million individuals across the region.

KCB Bank Kenya Managing Director Annastacia Kimtai said the partnership would expand access to affordable credit for businesses that have historically faced financing barriers, particularly women-led and climate-focused enterprises.

What’s next

Beyond capital deployment, IFC will work with participating institutions to strengthen their capacity to serve MSMEs and expand sustainable financing solutions. The program is expected to serve as a model for scaling risk-sharing mechanisms across Africa, where access to credit remains a key barrier to private sector growth.

As Kenya continues to position itself as a regional hub for entrepreneurship and digital finance, the success of the CFLG initiative could play a pivotal role in unlocking capital flows, driving inclusive growth, and supporting the next generation of small businesses.