Why blended finance is gaining traction in Kenya's search for sustainable funding

Standard Chartered Kenya Head of Coverage Birju Sanghrajka and KenInvest CEO John Mwendwa during the UK-Kenya Business Forum. [Courtesy]

As Kenya looks for new ways to finance development without deepening its debt burden, blended finance is increasingly being discussed as part of the solution. The approach, which combines public or concessional funding with private capital, is being positioned as a way to attract long-term investment into priority sectors while managing risk for investors.

The model featured prominently in recent UK-Kenya business discussions, where Standard Chartered highlighted blended finance as a practical tool to support investment in areas such as energy, agriculture and infrastructure. Rather than framing it as a quick fix, the bank has argued that blended finance should be understood as one option within a broader financing toolkit for emerging markets.

In simple terms, blended finance works by using public or development funding to reduce the risks associated with investing in projects that might otherwise struggle to secure commercial financing. Supporters say this can help crowd in private capital at a time when governments face limited fiscal space and donor funding is under pressure.

Across Africa, blended finance has been promoted as a response to a widening development financing gap, particularly in infrastructure and climate-related projects. In Kenya, the approach has been used in sectors such as renewable energy and agribusiness, where long-term funding is often difficult to secure through conventional lending.

However, analysts caution that blended finance is not a silver bullet. Its effectiveness, they argue, depends heavily on how projects are designed, who bears the risk, and how outcomes are measured. Poorly structured deals may attract capital without delivering meaningful benefits to local economies.

Recent reviews of Kenya’s impact investing landscape suggest that many blended finance transactions are led by development finance institutions and international partners, with structures that prioritise stability and predictability. While this can help mobilise capital at scale, observers note that it can also limit flexibility for smaller enterprises operating in informal or high-risk environments.

Development practitioners have echoed similar views, emphasising that local context matters. Experts have warned that top-down investment models risk overlooking community priorities if local stakeholders are not meaningfully involved from the outset. Strong governance, transparency and accountability, they argue, are essential if public or concessional funds are to deliver lasting value.

Standard Chartered has acknowledged these complexities, stressing that blended finance works best when partnerships are carefully structured and aligned with national development goals. The bank said the success of such models depends not only on attracting capital, but on ensuring projects are commercially viable while delivering measurable social and economic outcomes.

For Kenya’s small and medium-sized enterprises, access to affordable and patient capital remains a persistent challenge. High borrowing costs and short loan tenures continue to constrain growth, even as businesses are expected to drive job creation and economic resilience.