The challenge of inadequate financing has had a significant impact on farmers by limiting their ability to invest in essential resources such as seeds, fertilizer, equipment and technology.
Agricultural Finance Corporation (AFC) Managing Director George Kubai says that farmers were facing numerous challenges that hindered their productivity and profitability which includes adequate financing.
Speaking when AFC launched their Strategic Plan 2023-2027, the MD noted that the limitation has led to lower crop yields and a reduction of the overall productivity.
He noted that insufficient financing has also made it difficult for farmers to manage risks such as weather-related disasters or market fluctuations, leading to financial instability and potential crop failure.
‘Access to appropriate financing is crucial, it is the bedrock of agricultural development and rural prosperity and therefore prioritizing its enhancement is paramount,’ he said.
Kubai added that by facilitating financial access, farmers would b
e empowered to engage in productive investments, mitigate risks, stabilize income fluctuations, access markets, embrace technology, and ultimately elevate their livelihoods and well-being.
He explained that in advanced economies boasting of higher productivity, private financing often steps in to fill the gap in public funding for agriculture.
‘Regrettably, Kenya diverges from this trend as agriculture represents about 3.6 percent of commercial banks’ lending portfolios, totaling Sh95.78 billion out of Sh2.48 Trillion in private sector loans,’ the MD said.
The agricultural credit demand for the country, he added, exceeds Sh200 billion annually and out of this, the Agricultural Finance Corporation receives loan applications surpassing Sh15 billion annually and could only extend approximately Sh4.5 billion in support.
‘The strategic plan being launched today is a seed, a promise of sustenance and the foundation for a thriving agricultural sector and will address these challenges by providing solutions that
will help farmers thrive,’ Kubai said.
Out of the strategic plan that is anchored on eight pillars that will embody AFC commitment to drive growth and foster sustainability within the agricultural sector, the first two would look at Financing Agri-food Value Chains and Enhancing Financial Inclusion.
Alongside the unveiling of the strategic plan for 2023-2027, AFC has also introduced two innovative products namely: Asset Finance and Open-Line Agribusiness product to foster financial inclusion and revolutionize their business model.
‘The tailor made financing solution allows clients with agribusiness loans to consolidate their loan charges every six years, covering three cycles of two years each and this streamlines processes and reduces both time and costs,’ Kubai explained.
The Corporation is also pursuing the Sustainability Standards and Certification Development (EOSD), a certification dedicated to value driven financial institutions.
Agriculture and Livestock Development Cabinet Secretary Mithika Lint
uri in a speech read on his behalf by Livestock PS Jonathan Mueke, noted that AFC’s strategic plan comes at a crucial time and that by providing tailored financial solutions, the corporation can empower farmers, agribusinesses, and agricultural value chain actors, enhancing productivity, creating jobs, boosting exports and improving food security.
Linturi appealed to individuals, who still owe AFC to settle their debts saying that the funds entrusted to the Corporation are earmarked for enhancing agricultural productivity, not for investing in real estate.
‘The goal for AFC is to support farmers and fuel agricultural growth. Your timely payments will enable the Corporation to continue with its mission of financing the agricultural sector effectively,’ the CS said.
AFC Board of Directors Chairman Eng. John Mruttu said the plan was not a static blueprint, but a dynamic roadmap adaptable to the evolving needs of the agricultural sector.
AFC has been instrumental in the development of agriculture, providing a
n average of 26 percent of the total credit to the sector, since independence.
Agriculture directly contributes 25 percent to the Country’s GDP, with an additional 27percent indirectly supporting other economic sectors like manufacturing. It also employs about 40 percent of the population.
Source: Kenya News Agency