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Kenya: Country in $50m Farm Financing Initiative
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East African Business Week (Kampala)
12 May 2008
Posted to the web 12 May 2008
Nairobi
A new major partnership where smallholder farmers and small agricultural enterprises will be helped with financing to build viable businesses has been been launched.
The Alliance for a Green Revolution in Africa (AGRA), in partnership with Equity Bank Limited, the International Fund for Agricultural Development (IFAD) and the Kenya Ministry of Agriculture signed an agreement for ) a loan facility of US$50 million (About Kshs3 billion) to accelerate access to affordable financing.
This money is targeting 2.5 million farmers and 15,000 agricultural value chain members like rural input shops, fertilizers and seed wholesalers and importers, grain traders and food processors.
The loans will be offered at a 10% interest rate per annum, a statement from the alliance said. The programme was designed to boost agricultural productivity and household incomes, create employment, and bring training, targeted subsidies, and insurance programmes to the poor smallholder farmers.
The plan also includes insurance products designed to offset unpredictable threats such as weather disturbances and disease. Equity Bank's loan facility of $50 million will operate against a $5 million "cash guarantee fund" from AGRA and the International Fund for Agricultural Development. The fund will reduce part of the risk of lending by Equity Bank, adding a much needed element of security.
"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.
Equity Bank's Chief Executive Officer James Mwangi said, "Farmers are the backbone of our economy. They deserve access to the affordable credit that will enable them to make a profit and continue Kenya's trajectory of growth."
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 agro-dealers' accounts are credited, enabling them to purchase supplies.
"I am delighted with this partnership of AGRA with the Equity Bank, the Government of Kenya and IFAD. It will help boost food security and create badly needed jobs in rural areas. AGRA will work with banks across African countries to scale up similar models," said Mr. Annan.
AGRA is a partnership-driven organization dedicated to helping millions of small-holder farmers across Africa end poverty and hunger and increase their productivity and profits. Its programmes operate across the agricultural value chain in sub-Saharan Africa.
Agriculture employs over three-quarters of the labour force, but like 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.
"Agriculture is the main activity of the rural poor in Kenya, yet most farmers are unable to afford improved seeds and fertilizers," said IFAD Vice President Kanayo Nwanze. "This programme will finally get them the supplies they need, as well as increase the flow of services and raise incomes across the sector. It is comprehensive," he added.
The agreement between Equity Bank, AGRA, IFAD and the Ministry of Agriculture will make available two main types of financial services - loans designed for farmers, and loans for small agricultural business players.
Farmers' loans include input loans (to help farmers purchase seeds, fertilizers and pesticides) and cash advances that will enable them to meet urgent financial needs, such as school fees and medical bills, while waiting for payment for their produce.
Small business loans that target agro-dealers, agro-processors, importers and input manufacturers will finance working capital and operational needs, and structured trade finance will help businesses finance their imports.
"As Kenya rebuilds following a tumultuous period, there are still many challenges ahead. There are lots of internally displaced persons. Many have lost their lands and ability to produce food. Vast areas of the country now experience challenges of getting access to affordable seeds and fertilizers. Unless urgent measures are taken, food insecurity will deepen," said Mr. Kofi Annan, Chair of the Board of AGRA and former Secretary-General of the United Nations.
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"I am delighted with this partnership of AGRA with the Equity Bank, the Government of Kenya and IFAD. It will help boost food security and create badly needed jobs in rural areas. AGRA will work with banks across African countries to scale up similar models," said Annan
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