Enterprise

Here is how I put my agribusiness on its feet again after cash woes

Ndarugu

Mr Ndarugu irrigates his seedlings on the Nakuru-Nairobi highway in Nakuru town. PHOTO | FAUSTINE NGILA | NMG

Summary

  • Around two-thirds of the developing world's rural population of 3 billion people live in small farm households, and many of them are poor, food insecure and vulnerable to the effects of a changing climate.
  • Smallholder farmers in Kenya face a variety of barriers to advancing their crop and animal production, including the setup of traditional banking institutions and an absence of capital and customized loan products.
  • Traditional screening models have always overestimated the risk of default for farmers, cutting them off from finance that could improve productivity.

In the past five years, John Ndarugu has watched his agribusiness grow from a small venture to a vast investment, enabling him to achieve milestones he never imagined.

The Nakuru resident, who is a father of three, narrates how his fruit and flower seedling enterprise suffered in 2016, incurring heavy losses.

"I was in deep financial distress. I had not paid my land rent fee for several seasons because sales had depreciated. I had no cash to pay my employees and most seedlings dried up for lack of irrigation. I lost a lot of money," he recalls.

The saving grace, however, came when he obtained a credit from Transnational Bank.

"One friend introduced me to Transnational Bank which assessed my business and gave me a substantial amount of money on loan. I immediately invested the cash into the business and resumed normal operations," he says.

Mr Ndarugu rehired his farm staff, bought new seedlings and could now afford to transport the small plant to the houses of customers by hiring a pickup.

At his seedling farm, you will find kales, cabbages and spinach seedling for Sh10 but all fruit seedlings for between Sh20 and Sh50.

Customers part with at least Sh100 for every flower seedling, with some going for as high as Sh5,000. During the planting season of November, he has been cashing in on the huge demand, as many people flock to his farm looking for various types of seedlings.

"This has even allowed me to also source, grow and sell softwood and hardwood seedlings which bring good money. Last year I bought my own pickup and now I supply the seedlings myself," Mr Ndarugu reckons, adding that on a good day he can make up to Sh100,000.

He says without the loan, his agribusiness would have fallen on hard times.

"I am almost clearing the loan now, and I have the managers of the bank to thank for rescuing my business. It also opened direct jobs for ten farmhands whom I work with. I have educated my children and also helped in several community projects because of the business," he says.

However, Transnational Bank has been making losses in the past few years, and was recently acquired by Nigeria’s top lender Access Bank, which says it will continue helping farmers to realise their potential.

The bank recently announced that it would be penetrating into Kenya's agribusiness zones, starting with helping farmers irrigate crops in the semi-arid counties of Machakos, Nyeri and Meru. In the tea and coffee zones of Kiambu and Nyandarua counties, the bank will be looking to finance farm estates to help them achieve their full agricultural potential.

In the fishing community county of Kisumu, fishermen will benefit from its facilities and eradicate the hurdle of preservation and transportation of fish to other major towns like ELdoret, Nairobi and Mombasa.

Access Bank will also be seeking to boost production capacity for maize, Kenya's staple, in the food basket regions of Kakamega and Bungoma counties.

Group Managing Director of Access Bank Herbert Wigwe said the lender will work with host communities to improve their lives while also helping unlock the rural economy where over 70 per cent of Kenyans live.

"With over two-thirds of the country being rural, a more aggressive financial inclusion drive will further improve lives," said Mr Wigwe.

Kenya, which heavily depends on agriculture for the livelihoods of millions of people, still grapples with challenges of erratic rains, high cost of fertiliser and pesticides, with farmers also decrying existential post-harvest losses.

"Access Bank Kenya is excited about the potential that exists in this market, and the opportunity it has to take the lead in unlocking this potential," added Mr Wigwe.

Around two-thirds of the developing world's rural population of 3 billion people live in small farm households, and many of them are poor, food insecure and vulnerable to the effects of a changing climate.

Smallholder farmers in Kenya, including those working with the Feed the Future East Africa Catalytic Sustainable Agribusiness Investment (CSAI) Project, face a variety of barriers to advancing their crop and animal production, including the setup of traditional banking institutions and an absence of capital and customized loan products.

Traditional screening models have always overestimated the risk of default for farmers, cutting them off from finance that could improve productivity.

With banks placing securities for legacy loan products, farmers are unable to find collateral and are forced to turn to informal lending opportunities. This, Access Bank says, is a gap it is working to bridge.