Kenya’s motor vehicle assemblers and parts manufacturers are set to access soft loans of up to Sh7.5 billion under a Japanese-backed programme aimed at expanding local vehicle production and reducing the country’s reliance on imports.
The funding will come from a 15 billion Japanese Yen (about Sh12 billion) Samurai Loan Facility signed between Kenya and Japan in March 2026.
The Ministry of Trade has been seeking approval to spend Sh7.5 billion of the loan in the 2026/27 financial year to establish and upgrade an automotive parts manufacturing facility, provide technical support to the industry players, among others as Kenya seeks to grow its automotive industry.
The three-year programme is aimed at supporting Kenya’s goal of becoming a regional automotive manufacturing hub.
A source within the industry has told the Business Daily that the Sh7.5 billion drawdown is the first portion of the Samurai loan and the rest will follow.
‘The Samurai money will be a soft loan for automotive assemblers and parts manufacturers like batteries, windscreen etc,’ the source said.
‘Assemblers will apply for the loan or the person applying for the vehicle loan will apply directly to the bank appointed by the government of Kenya, it will address the demand and supply side.’
The programme will also fund technical training, legal and regulatory reforms, support for vehicle dealers, financing for the purchase of locally assembled vehicles, and project administration.
‘The project will require Sh7.545 billion for the following [other] activities: development of legal framework: Automotive Bill, public participation; investment support for new vehicle dealers; financing approved applicants for locally assembled new vehicle purchases; …among other activities,’ said Principal Secretary Juma Mukhwana.
The project is expected to boost local manufacturing, create jobs and strengthen Kenya’s automotive industry.
‘The Kenya Vehicle Manufacturers (KVM) … and other assemblers will access the soft loan like any other to enhance their capacities like upgrade their plants. A portion will go to skills development,’ the source added.
Under the programme, assemblers will be able to apply for the loans to expand production capacity and upgrade plants, while individuals seeking to purchase locally assembled vehicles will access financing through banks appointed by the government.
In a May 20 presentation to a parliamentary trade, industry and cooperatives committee, the PS said the loan will finance the National Automotive Sector Development Project.
‘The Government of Kenya signed a three-year Samurai loan financing facility agreement of 15 billion Japanese Yen (about Sh13.1 billion) with the Government of Japan for the development of the automotive sector,’ said Mr Mukhwana in the presentation.
‘In the financial year 2026/27 the project will require Sh7.545 billion for the following activities: establishment and enhancement of production facility for automotive parts manufacturing.’
Samurai financing refers to debt dominated in Japan’s Yen and subject to Japanese regulations.