Nairobi — The Alliance for a Green Revolution in Africa (Agra) and the International Fund for Agricultural Development (Ifad) have launched a Ksh3 billion ($47.6 million) credit line for Kenyan farmers.

The credit, dubbed Kilimo Biashara, will be administered by Equity Bank and the Ministry of Agriculture.

Equity Bank chief executive officer Dr James Mwangi said the programme has the potential to make Kenya not only self-reliant in food production but also a net exporter.

The loans, to be offered at a 10 per cent interest, will target small-scale farmers, agro-input suppliers and food processors as well as other businesses in the agricultural value chain.

Mr Mwangi said that Kenya had the potential to feed the world and must act now given that China had imposed export duty on rice and wheat, pushing prices of the staple foods higher.

"Global wheat production is at its lowest in 50 years while food supplies are shrinking as a result of demand for biofuels, climate change and increasing populations," said Dr Mwangi, adding that, in future, food will overtake oil and gold as the world's most traded commodity. "Kenya can position itself to meet this demand and transform its economy by exporting food," he added.

Some 2.5 million farmers will benefit from the credit facility in the initial three-year period, during which farming will be transformed from a way of life into a business enterprise. Additionally, 15,000 agricultural value chain players such as input shops, grain traders and food processors will be involved in the programme.

President Mwai Kibaki said Kilimo Biashara is the first among a raft of grassroots farmer support products to be launched in coming months to get agriculture on the road to recovery following years of decline and collapse of mismanaged institutions, leading to high poverty levels in the country.

Agriculture Minister William Ruto said the government was pursuing an aggressive strategy to revitalise agriculture, which accounts for 24 per cent of the country's gross domestic product and 75 per cent of industrial raw materials. It also contributes 80 per cent of the country's employment and, therefore, is key to the reduction of poverty, especially in the rural areas.

Mr Ruto said that, as part of the revival of the agricultural sector, the government will double the agricultural research budget, which currently stands at 2 per cent of the national budget and has been blamed for the poor availability of modern farm practices to the majority of farmers.

"Under the new research approach, the focus will be on high yielding, early maturing region-specific varieties and the provision of information to the farmers at the lowest level," Mr Ruto said.

Inputs that are being given priority are fertilisers and certified seeds.

The minister disclosed that the government is deepening private sector participation from 8 to 40 per cent to facilitate easier access of inputs and credit.

"If Kenya is to overcome its maize shortfall and the rising prices of food, farmers and other key players in the sector need to be mobilised. They badly need financial support so seeds and fertilisers can flow into our rural areas, to trigger a production response," he said. "This programme is an essential part of our national Strategy for Revitalisation of Agriculture and will help to rapidly get smallholder agriculture back on track."

The Kilimo Biashara will provide two main types of loans designed for farmers and small agricultural business players.

Farmers' loans include input credit and cash advances that will enable them to meet urgent financial needs, such as school fees and medical bills, while awaiting payment for their produce.

Small business loans will target agro-dealers, agro-processors, importers and input manufacturers to finance working capital and operational needs while structured trade finance will help businesses finance their imports.

To mitigate the high risks of farming, the plan includes insurance products designed to offset risks such as adverse weather and disease.

Agra chairman Kofi Annan said in a statement that the alliance will work with banks across African countries to scale up similar models.

"The African Green Revolution cannot occur unless farmers can access and afford improved farm inputs. And access to finance is a basic, previously unmet, need for farmers struggling to increase their productivity," said Dr Akin Adesina, vice president of Policy and Partnerships for Agra. "This partnership with Equity Bank unleashes a financial revolution for Kenya's poor smallholder farmers, as well as farm input traders, at a scale never seen before in any African country."

As part of the programme, the Ministry of Agriculture plans to contribute millions of dollars in subsidies targeted at Kenya's most vulnerable farmers.

Eligible farmers will receive vouchers that they can redeem at agro-dealer shops in exchange for farm inputs.

Upon returning the vouchers to Equity Bank, the dealers' accounts are credited, enabling them to purchase more supplies.

In Kenya, agriculture employs over three-quarters of the labour force, but as elsewhere in sub-Saharan Africa, farmers rarely have access to financial services. For example, in 2006 there were only 3.8 million bank accounts in Kenya, a nation with a potential bankable population of 16.5 million.