In a bold shift from traditional banking norms, Stanbic Bank Kenya has announced plans to raise $100 million (KES12.9 billion) to finance startups and small businesses across East Africa. This initiative positions the lender as one of the few commercial banks venturing into a domain typically dominated by venture capital firms and development finance institutions (DFIs). With the move, Stanbic aims to fill a long-standing funding gap that has hindered early-stage businesses from scaling.
Catalytic Fund: A Patient Capital Approach
The proposed funding will flow through Stanbic’s Catalytic Fund, launched in 2020 as part of the bank’s broader social impact and enterprise development strategy. Unlike conventional loans, the fund offers patient, grant-like capital aimed at de-risking early ventures and enabling long-term sustainability. This approach is designed to support startups in sectors often overlooked by traditional financiers, including agritech, the creative economy, healthtech and manufacturing.
Redefining the Role of Commercial Banks
Stanbic’s entry into startup financing signals a shift in how commercial banks in Kenya are engaging with the innovation economy. While most banks remain focused on established businesses with predictable cash flows, Stanbic is exploring a broader continuum that includes early-stage enterprises with high growth potential. CEO Joshua Oigara believes this shift is necessary to support the vast majority of entrepreneurs currently excluded from the formal credit system.
Learning from Existing Gaps
According to Oigara, the current financial system often neglects 80% of potential clients by concentrating solely on businesses that are already investor-ready. Stanbic’s Catalytic Fund is a response to this oversight, designed to reach those on the margins and help them grow into bankable enterprises. The new fundraising effort aims to significantly expand the fund’s capacity to do just that.
A Modest Start, with Bigger Ambitions
Since its launch, the Catalytic Fund has disbursed KES182.4 million ($1.4 million), with KES63 million ($487,616) issued in 2024 alone. While modest in absolute terms, this funding has been impactful in sectors where credit is typically scarce or prohibitively expensive. The bank now hopes to multiply that impact tenfold by raising the $100 million target, setting a new precedent for commercial banks across the continent.
Focus on Long-Term Economic Transformation
The fund is not just about injecting capital; it’s about aligning with the long lead times required for transformation in critical sectors. Oigara highlighted that industries like agriculture and energy need patient financing, sometimes over a decade, to deliver tangible returns. By targeting such areas, Stanbic is aligning its financial goals with broader economic development priorities in East Africa.
A Contrast to the VC and DFI Models
Most startups in the region continue to rely on venture capital, donor funds, and DFIs for early support , channels that are increasingly strained and competitive. Stanbic’s model introduces a new dimension, offering local insights, structured lending, and institutional stability that global capital may not always provide. This could offer founders an alternative path to growth that is more contextually relevant and sustainable.
Stanbic Bank’s $100 million fundraising goal represents more than just a financial milestone. It’s a test of whether commercial banks can play a more active role in Africa’s innovation ecosystem. By stepping into the startup arena, the bank is not only challenging existing norms but also signaling confidence in the region’s entrepreneurial potential. If successful, this model could reshape how early-stage businesses are financed across the continent.
Source : Techcabal