Loans to farmers and agricultural co-operatives from State-run Agricultural Finance Corporation (AFC) rose by 16.8 percent to Sh1.1 billion in the three months ended September 2025, signalling firmer demand for subsidised credit as input costs remain elevated.
The increase shows a continued rebound in lending at the corporation, reversing years of subdued disbursements that had constrained access to long-term financing in the sector.
According to internal portfolio performance data, the agency disbursed Sh936 million in the similar quarter of the prior year, translating to a Sh157 million upturn in the review period.
The growth builds on a strong performance posted in the financial year ended June 2025, when AFC lending rose to a record Sh4.7 billion, breaking a three-year decline that followed tighter credit conditions.
Agriculture remains the pillar of Kenya’s economy, employing more than half of the population, with constrained access to affordable financing often cited as the main barrier to productivity growth.
AFC operates as a development institution mandated to provide long-term and affordable credit to farmers, co-operatives and agribusinesses underserved by banks due to perceived risk.
The corporation lends at a fixed interest rate of 10 percent, making its loans a key financing channel for small and medium-scale agricultural producers.
AFC’s total loan portfolio grew by two percent during the quarter to September last year, to hit Sh12.3 billion, up from Sh12.08 billion at the close of June.
Cumulative repayments rose 13 percent to Sh1.24 billion during the quarter, compared with Sh1.1 billion a year earlier.
AFC has struggled with elevated defaults, with non-performing loans peaking at 31 percent in the year ended June 2022 before easing to 16 percent last year.
The Auditor-General has in the past flagged the agency for failing to apply due diligence in the disbursement of funds, putting its control mechanism into question.
The auditor questioned the quality of collateral the corporation used in loan agreements amid strains in recovery.
AFC’s improved lending performance also comes amid broader efforts by the government to crowd in development finance to agriculture as commercial banks scale back long-tenor lending.
In 2024, the corporation secured a Sh600 million facility from Kenya Development Corporation for onward lending to pastoralists and small enterprises in the agriculture value chain.
The funding was aimed at deepening credit access in arid and semi-arid areas, where climate shocks and limited financial infrastructure continue to constrain production and incomes.
