The World Bank said it has approved a USD 250mn zero-interest loan to help Kenya fight extreme poverty by setting up a national social safety net programme.

The safety net, which will unite five existing government programmes into a better coordinated and more efficient system, is aimed to reach up to 3.3 million of the country’s poorest people by 2017 and cushion them from the worst effects of crises such as drought, malnutrition, and unemployment.

The World Bank noted that while Kenya has posted strong economic growth over the past decade, 38% of Kenyans still live in poverty, especially in rural areas.

“Being cushioned against devastating income losses by a small but regular transfer of money from the program helps poor people afford consistent nutrition and healthcare, and keep children in school,” Diarietou Gaye, World Bank Country Director for Kenya, said in a statement.

The funds from the World Bank’s International Development Association (IDA) will be disbursed to Kenya over the next four years. According to Ritva Reinikka, World Bank Director for Human Development in Africa, the success of such broad national programmes was first demonstrated in Brazil and Mexico, while in Africa safety nets have helped make rapid gains possible in countries like Ethiopia and Rwanda.

Last month, global ratings agency Moody’s projected Kenya’s economic growth to increase marginally to 5%-6% in 2013-15 from 4.7% in 2012 thanks to higher investments, adding that despite improving prospects, a limited economic diversification, narrow export base, low per-capita income and weak public-sector balance sheet, which is characterised by rising deficit and debt levels, continue to constrain the country’s B1 rating.

Earlier on Wednesday, the European Union said it would give Kenya some KES 40bn to KES 50bn (EUR 432mn) for use in agriculture and other sectors under an aid programme for the period from 2014 to 2020.