The Alliance for a Green Revolution in Africa, Equity Bank, International Fund for Agricultural Development, and the Government of Kenya Offer Innovative Solution to Farmers’ Credit Crunch
A major new partnership was launched today to provide smallholder farmers and small agricultural enterprises with the financing they need to break out of poverty and build viable businesses. 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 (3 billion Kenyan shillings) to accelerate access to affordable financing for 2.5 million farmers and 15,000 agricultural value chain members such as rural input shops, fertilizers and seed wholesalers and importers, grain traders and food processors.
“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 A. Annan, Chair of the Board of AGRA and former Secretary-General of the United Nations. “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.
Equity Bank’s loan facility of US$50 million will operate against a US$5 million “cash guarantee fund” from AGRA and the International Fund for Agricultural Development. This fund would 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. “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.”
“Equity Bank is proud to be offering this service to the farmers and agricultural business of Kenya,” said Bank Chief Executive Officer James Mwangi. “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.”
The loans will be offered at a 10 percent interest rate per annum.
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.
”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 mobilized. They badly need financial support so seeds and fertilizers can flow into our rural areas, to trigger a production response,” said Mr. William Ruto, Kenyan Minister of Agriculture. “This programme is an essential part of our national Strategy for Revitalization of Agriculture. This innovative financing arrangement will help to rapidly get smallholder agriculture back on track to assure food security.”
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.
The programme fills a gap in financial services for the farm sector in sub-Saharan Africa. The guarantee fund, in particular, is an example of the innovative methods AGRA is developing to improve the economic outlook for small-scale farmers. It will work in tandem with AGRA’s other efforts, such as a programme to develop thousands of agro-dealers in the region, who will sell affordable farm inputs, such as seeds and fertilizers, to poor farmers in remote rural areas.
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.
Equity Bank has a history of developing initiatives that target groups often left out of the banking and financial sector. In 2007, for example, the FANIKISHA initiative was launched as a joint effort by UNDP-Kenya and Equity Bank to promote women entrepreneurs in Kenya.
FINANCIAL SERVICES TO OPEN DOORS
In Kenya, 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.”
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.
To mitigate the high risks of farming, which often deter farmers and small businesses from investing even minimal amounts to improve productivity, the plan includes insurance products designed to offset unpredictable threats such as weather disturbances and disease.
Additional partners including Citizens Network for Foreign Affairs (CNFA) and the Agricultural Market Development Trust (AGMARK) will contribute by strengthening capacity building, coordinating agro-dealers’ mobilization and trainings and developing efficient delivery partnerships across the entire value chain.
The initial agreement launches a three-year pilot programme, which, if successful, will be expanded further.
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About the Alliance for a Green Revolution in Africa (AGRA)
AGRA is a dynamic partnership working across the African continent to help millions of small-scale farmers and their families lift themselves out of poverty and hunger. AGRA programs develop practical solutions to significantly boost farm productivity and incomes for the poor while safeguarding the environment. AGRA advocates for policies that support its work across all key aspects of the African agricultural “value chain”—from seeds, soil health, and water to markets and agricultural education.
AGRA’s Board is chaired by Kofi A. Annan, the former Secretary-General of the United Nations. AGRA’s President is Dr. A. Namanga Ngongi, former Deputy Executive Director of the United Nations World Food Programme. With initial support from the Rockefeller Foundation and the Bill & Melinda Gates Foundation, AGRA maintains offices in Nairobi, Kenya and Accra, Ghana. For more information, go to www.agra-alliance.org .
Equity Bank
For more information, contact Muriuki/Sam@ Blueprint Tel 2719251 M O721235496/0722755633
