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Supporting impact investing at the frontier in Turkana, Kenya

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Maja Jakobsen, Mark Essex

Over the past 10 years in east Africa, and particularly in Kenya, there has been an explosion of interest in impact investing and its more commercially-minded cousin private equity. Coming out of the compelling ‘Africa Rising’ narrative, an estimated $600 million of impact investments have been made in Kenya in the last decade, with a similar amount planned for the next five years, albeit a fraction of the estimated $2.6 billion raised by private equity firms for the region over the same period.

In tapping into this inexorable interest, we, in collaboration with the Lundin Foundation, have developed the Turkana Catalyst Initiative through the Kenya Extractives Programme (K-EXPRO) since 2017. The Turkana Catalyst Initiative is an innovative business accelerator and seed financing programme that works as a feeder fund for impact investors focused on northern Kenya. Donor support can usefully bridge a capacity and financing gap for emerging businesses, including social enterprises, and help them become an investible opportunity for impact investors.

Read more about the K-EXPRO

Background to the initiative

Like elsewhere in Kenya, small and medium-sized enterprises (SMEs) are the dominant economic agents in Turkana. They face significant challenges in this county, though, and as a result Turkana is characterised by a small and undiversified formal local economy, and extremely low levels of financial penetration, especially outside of the county capital, Lodwar.

But with the expansion of commercial interests in oil in Turkana, in particular the construction phase for ‘Project Oil Kenya’, there is growing potential for direct and indirect supply chain opportunities. The Turkana Catalyst Initiative taps into this opportunity and supports local businesses in Turkana County preparing for this and other growth prospects in northern Kenya.

The Lundin Foundation, with K-EXPRO support, trialled a three-pronged approach that is now fully up and running with future funding secured. It drew conceptual and practical experience from ‘impact investing’ with a particular focus on:

  • supporting the growth of local SMEs and social enterprises by developing their business management practices through ‘action learning’;
  • facilitating business linkages within and beyond Turkana and not just oil; and
  • providing SMEs with access to finance to build up experience and evidence of a repayment record, but on concessional terms.

These three are all essential and complementary mechanisms to support local Turkana SMEs to become more reliable and competitive suppliers, better prepared for all economic opportunities in the county and beyond.