Loans to farmers and co-operative societies from the Agricultural Finance Corporations (AFC) rose 33.1 percent during the year ended June 2025 to hit an all-time high of Sh4.7 billion, bucking a drop trend observed in the three consecutive years to June 2024.
AFC is a State-owned Development Financial Institution (DFI) mandated to assist in the development of agriculture by loaning farmers and agencies in the sector. It provides credit to farmers at a 10 percent interest charge.
“As an institution, the financial year ended June 2025 was one of our best years in terms of performance. It was actually historical. In terms of the loan portfolio, we exceeded our target because we were able to disburse a total of Sh4.7 billion compared to Sh3.53 billion the previous year,” AFC Managing Director George Kubai said in an interview.
The number of clients accessing the loans also grew during the period to stand at 202,000 at the close of June this year, up from 200,763 in June 2024.
Last year, AFC tapped a Sh600 million loan from the Kenya Development Corporation for onward lending to pastoralists and small enterprises in the agricultural sector.
The corporation has issued a cumulative Sh12.08 billion to borrowers to date, with the default rate currently standing at 16 percent, having come down from a high of 31 percent recorded in the year to June 2022.
Mr Kubai said that AFC raised its debt repayment collections for the year by a marginal 0.7 percent to Sh4.49 billion, up from Sh4.46 billion in a similar period the previous year.
The latest Auditor General report covering the year ended June 30, 2024, shows that within the AFC non-performing loans, five accounts reflect credit advanced to directors with arrears totalling Sh35.7 million. The loans have been referred to the debt recovery unit.
“Review of records revealed that the accounts have been graded as non-collectable even upon disposal of attached securities as per the existing credit policy. Although a provision of Sh4.8 million has been made on directors’ loans, this may be adequate,” Auditor General Nancy Gathungu said. “In the circumstances, the accuracy and recoverability of the directors’ loans balance could not be confirmed.”
Ms Gathungu’s office has previously faulted the DFI for failing to apply due diligence in the disbursement of funds, in what has put its internal controls and lending framework into question. The audit office questioned the quality of collateral that the corporation used in loan deals amid strains in the recovery of defaulted credit.
In May last year, AFC said it had hired private debt collectors to recover defaulted loans, in a move it said would enable it to operate on a revolving-funds basis as designed.
