Sh100 billion fund set up to grow agriculture in Kenya

A maize farm in Kitale. PHOTO | JARED NYATAYA | NMG

The Agriculture Finance Corporation has partnered with Financial Service Deepening (FSD) Kenya and the Alliance for Green Revolution in Africa to create a Sh100 billion fund aimed at boosting lending to farmers in the next five years.

AFC says the new model will slash imports of food, increase local output and spur economic growth in the sector that has over the years been underfunded.

AFC managing director George Kubai said demand for loans from farmers stands at Sh15 billion every year but the agency is only able to disburse Sh4 billion in the same period.

"This model will require an estimated financing of at least Sh100 billion in the next five years,” said Mr Kubai.

AFC gives loans to farmers at 10 percent interest rate, making it one of the cheapest in the market.

In the last five years, the agency has disbursed loans worth Sh20 billion to farmers. Mr Kubai said the new model will positively impact on 2.6 million agricultural sector players with a special focus on women, youth and MSMEs.

"To address some of these (funding) challenges, AFC has collaborated with AGRA, and FSD Kenya to sustainably impact the agri-finance space," he said yesterday during AFC investors engagement conference in Nairobi.

The four financing models are wholesale lending, warehouse receipt financing, mechanisation and agriculture credit guarantee financing.

Under the wholesale lending model, AFC will give money to Saccos, microfinance institutions and anchor clients to serve financially excluded segments to enhance outreach to the farmers through onward lending.

The warehouse receipt model will serve as an alternative collateral mechanism that will enable producers to access credit backed by the warehouse receipt while the mechanisation model will give small scale farmers an opportunity to access machines such as tractors to scale up acreage under production.

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