Green credit for small businesses is growing in Kenya. Lenders are raising dedicated funding lines and building products for solar systems, efficient equipment, clean transport and climate-smart farming. At the same time, the Central Bank of Kenya’s green finance taxonomy, which has moved from voluntary to mandatory use, means banks must be able to show that what they call green really is.
For small and medium enterprises, that combination is good news, provided they come prepared.
The money is there
KCB Bank Kenya has secured a $100 million facility from the European Bank for Reconstruction and Development to expand credit to micro, small and medium-sized enterprises. It has also obtained a Green Climate Fund project preparation grant of about $540,000 to design a larger funding proposal for green MSME lending, which the bank described as a first for an East African lender. Other banks and microfinance institutions are building similar lines.
What lenders will ask for
Under a taxonomy, a loan is classified by the activity it finances. Expect lenders to request:
- A clear description of the asset or activity, such as a 10 kW rooftop solar system, a solar-powered cold room or drip irrigation for a specific acreage.
- Technical specifications and supplier quotes, including efficiency ratings and warranties.
- The expected benefit, such as diesel litres avoided, energy saved or water conserved. Simple before-and-after estimates are a good start.
- Permits and compliance documents where relevant, including environmental licences and, for producers, extended producer responsibility registration.
- Financial records, including mobile money statements and basic accounts, as for any loan.
Projects most likely to qualify
The strongest cases are projects that cut costs and emissions at the same time: replacing diesel generators with solar hybrids, upgrading motors and refrigeration, cold storage that reduces post-harvest losses, and efficient irrigation. They are easier to finance because the savings help repay the loan.
Practical tips
- Keep electricity, fuel and production data for at least six months before and after the investment.
- Use reputable suppliers that provide standard-compliant equipment and documentation.
- Consider applying through cooperatives or business associations, which can pool smaller projects into larger, bankable ones.
- Ask lenders about pay-as-you-go and leasing partners, which can lower upfront costs.
The taxonomy will make green lending more rigorous. Businesses that can show what they are financing and what it achieves will find it easier, not harder, to borrow.
Sources: Central Bank of Kenya: Green Finance Taxonomy and Climate Risk Disclosure Framework · The Standard: KCB commits Sh53b to green finance · Capital Business: KCB green loans rise to Sh48.8bn
