August 31st, 2026

As development finance tightens globally, delivering sustainable outcomes increasingly depends on whether programmes can mobilise capital, not only spend it. That is the context in which Financial Sector Deepening Kenya (FSD Kenya), with support from the UK government’s Foreign, Commonwealth & Development Office (FCDO), has been implementing the Sustainable Urban Economic Development (SUED) programme.

SUED is fundamentally an economic development programme, but its approach is also a practical example of financial sector deepening in action: strengthening the enabling environment for finance, improving the quality of investable opportunities, reducing transaction costs and risk, and crowding in private capital to support productive, climate-smart growth.

This is not about one-off projects. It is about building a repeatable pathway for investors, lenders, and public partners to finance inclusive green growth in Kenya’s secondary cities.

Why financial sector deepening is central to SUED’s approach

Financial sector deepening is often described in abstract terms, but the outcomes are concrete:

• More investable opportunities that financial institutions can credibly assess and finance.
• Better risk visibility and pricing, reducing reliance on perception and informal networks.
• Stronger intermediation, where banks, funds, and investors can deploy capital more efficiently.
• Broader access to finance, particularly for SMEs and value chains outside primary markets
• Increased capital allocation to productive sectors, including climate-resilient infrastructure and green value chains.

SUED contributes to these outcomes by converting local economic potential into structured investment pipelines and supporting targeted de-risking that enables commercial capital to participate.

The core model: catalytic public funding that unlocks larger pools of capital

The SUED model follows a straightforward sequence:

1. Plan with investment in mind: clarify economic priorities and identify investable projects.
2. Build a credible pipeline: develop investment profiles that investors can evaluate.
3. Reduce early-stage risk: address barriers that prevent financing (feasibility, structuring, permitting, implementation readiness)
4. Facilitate transactions: support partnerships and financing pathways that enable investment decisions.

This approach aligns with FSD Kenya’s goal of  unlock resilient futures for women, youth, MSMEs and their communities by improving the ecosystem that allows finance to flow into productive, job-creating activities.

Working with national and local government to make cities investable

1) Urban Economic Plans as a foundation for investment pipelines

SUED has developed 12 Urban Economic Plans (UEPs) through consultative processes with municipalities, focusing on realistic growth opportunities and priority investments. The municipalities are: Isiolo, Malindi, Kitui, Kisii, Eldoret, Kerugoya/Kutus, Bungoma, Iten, Kathwana, Mandera, Lamu, and Wote.

Critically, these plans are designed to be used, not filed. They translate into investable priorities and project pipelines that reduce uncertainty for investors and help public partners coordinate deliverable investments.

From a financial sector deepening perspective, UEPs function as market infrastructure: they strengthen the information and planning base that underpins investment decisions and reduces transaction costs for financiers assessing opportunities in secondary cities.

2) Building local capacity to sustain investment readiness

SUED pairs planning with capacity-building so municipal teams can continue investment promotion, project preparation, and coordination beyond the programme cycle.

This matters for sustainable finance. Investors and lenders respond to consistent deal of origination, credible counterparties, and reliable delivery environments. Strengthening municipal capacity improves bankability over time and supports a durable investment ecosystem.

Engaging the private sector to structure and finance real transactions

SUED’s investment profiles reflect deals across Agri-processing, climate-resilient infrastructure, and the circular economy. Examples include:

• Kisii: Avocado oil processing (Avofresh Processors), ~£2.57m investment
• Eldoret: Avocado pack house (The Fresh Products Ltd), ~£2.239m investment
• Lamu: Cashew nut processing (ENP Foods International), ~£2.263m investment
• Malindi: Fruit drying facility (Milly Fruits Processing), ~£1.95m investment
• Kerugoya/Kutus: Local hydropower grid (Hydrobox Kenya), ~£2.44m investment (~703kW)
• Kisii: Integrated waste management (Green Leaf Services), including material recovery and organic waste processing using black soldier fly,  ~£1.07m
• Isiolo: Sustainable urban drainage (SuDS), ~£1.04m investment to strengthen climate resilience.

These are not concept notes. They are structured opportunities with identifiable sponsors, locations, and capital requirements, developed with an explicit focus on what financiers need to see to participate.

From an FSD Kenya lens, each transaction supports deepening by:

• Expanding the geography of investable opportunities beyond primary markets
• Building market track record and investor confidence
• Strengthening value chains that can later access working capital, equipment finance, and risk management tools.
• Demonstrating replicable investment structures that others can follow.

The catalytic mechanism: Seed funding that crowds in external capital

Early-stage risk in secondary cities remains a consistent barrier: land and apporval complexity, uncertain cashflows, limited project preparation, and execution risk. SUED’s Seed Funding and technical support is designed to address these constraints where targeted support can unlock much larger pools of private and public capital.

Results reported by the programme illustrate this crowd-in effect:

• As of June 2026, £10.8m of Seed Funding mobilised £48.8m in external capital for agribusiness deals, with 22 agribusiness and infrastructure deals signed across 8 counties, with five of these completed and 17 of these under implementation.
• Separate programme reporting snapshots note £57.7 in private sector investment associated with signed deals, with about 92,114 jobs expected to be created and emancement of livelihoods for about 360,000 households projected from the 22 projects.

These figures are reported at different points in time and reflect different reporting bases, but the direction is consistent: targeted catalytic support is enabling capital mobilisation at scale.

Lessons learned: partnership is the multiplier

One of the clearest lessons from SUED’s implementation is that capital mobilisation is rarely constrained by a lack of interest. It is constrained by coordination: fragmented responsibilities across agencies, misaligned incentives, uneven information, and the practical “last-mile” barriers that can stall otherwise viable transactions. The programme has shown the value of bringing the full ecosystem to the same table early and often: national government, county and municipal leadership, regulators, private sponsors, local financial institutions, and development partners.

When stakeholders align around shared priorities, credible data, and clear pathways to close, projects move faster and risk is reduced for everyone involved. Looking ahead, the ambition is to deepen this convening role and translate learning into repeatable practice, expanding engagement with commercial banks, DFIs, impact investors, and other providers of catalytic capital to unlock larger financing rounds, crowd in private sector balance sheets, and build a stronger, more investable pipeline across secondary cities.

Why this matters for FCDO, FSD Kenya, and Kenya’s growth agenda

The purpose of this work is not simply to deliver individual projects. It is to strengthen the conditions under which investment can occur repeatedly and on an increasing scale. SUED’s model contributes to:

• Economic resilience and job creation through productive, private sector-led investment
• Green growth and climate resilience through infrastructure and value chain investments aligned to sustainability outcomes.
• Stronger financial intermediation by expanding pipelines and improving bankability for financiers.
• Demonstration effects that enable replication by counties, investors, and financial institutions

In short, SUED is helping to deliver on FSD Kenya’s mandate by deepening financial inclusion: improving the supply of bankable opportunities, enabling better allocation of capital, and supporting mechanisms that crowd in investment rather than replace it.

Looking ahead…

SUED’s current focus is firmly on execution and scale: moving a larger share of the active pipeline from structured opportunity to signed transaction and operational delivery. Building on the foundations already established through the UEPs, investment profiles, and Seed Funding, the programme is prioritising three forward-looking outcomes:

• Accelerating transaction closures by reducing remaining bottlenecks that typically delay financial close, including permitting, land and lease arrangements, final technical validation, and counterpart readiness.
• Deepening crowd-in by actively engaging commercial banks, impact investors, and other capital providers with a clearer, better-structured pipeline and stronger evidence of bankability in secondary cities.
• Strengthening replication by documenting what works, standardising elements of deal preparation, and reinforcing institutional capacity so that municipalities and private sponsors can originate and advance investable projects more independently over time.

This phase matters because it tests the underlying hypothesis of financial sector deepening: that targeted catalytic support, better information, and reduced early-stage risk can shift market behaviour and sustain investment flows beyond the life of a single programme. SUED’s immediate priority is to ensure that the portfolio transactions  reinforce a durable market pathway that others can follow.

The future development impact will increasingly be measured by whether public funding can catalyse durable financing ecosystems. Through FCDO’s support and FSD Kenya’s programme management, SUED is demonstrating a practical approach: build credible pipelines, reduce early-stage barriers, mobilise investment, and create replicable examples that shift market behaviour.

That is how financial sector deepening translates into tangible outcomes: more investment, stronger value chains, greener growth, and jobs where they are needed most.

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