Triple-value model unlocks potential of small-scale farmers

Small-scale farmers are the backbone of Kenya’s agriculture sector as they account for over 80 percent of the country’s total food output.

However, in spite of their crucial role in the national food value chain, small-scale or smallholder farmers grapple with many barriers hindering their productivity.

This calls for innovative models to enhance their capacity to drive sustainable food production.

Enhancing productivity and sustainability of small-scale or smallholder farming is critical to achieving Kenya’s food security and nutrition goals.

But we must first address three major constraints impeding the sustainability of our food production system from the perspective of the small grower.

First is the lack of affordable financing to meet operational costs including the purchase of critical farm inputs, livestock and irrigation equipment among other tools to enhance production.

Small-scale farming is viewed as a risky venture by financiers owing to its vulnerability to natural shocks such as drought but also pest and disease outbreaks, and increasingly, extreme weather events tied to climate change.

Apart from not being aware of agribusiness financial products in the market, many farmers are yet to grasp the value of crop and livestock insurance in mitigating the economic and social risks of agriculture.

Second is the escalating cost of seeds, fertiliser and pesticides. This denies farmers, especially in poor rural areas the ability to produce and earn more, and also fight pests and diseases resulting in a significant decline in crop and livestock yield.

Given the finite nature of land as a resource, failure to apply crucial inputs such as fertiliser severely curtails opportunities to grow production.

Third is the lack of knowledge and skills needed to practise innovative farming techniques that would significantly ramp up farm production.

Additionally, low adoption of sound practices like the construction of proper storage systems has resulted in high post-harvest losses.

According to the Food and Agricultural Organization (FAO), Kenya loses a colossal Sh72 billion annually in food waste and post-harvest losses across the food value chain.

Overcoming these constraints requires a three-pronged approach entailing not just the provision of affordable credit, but also strengthening access to quality farm supplies as well as the re-skilling of farmers in novel ways of crop production and livestock management.

This triple-value model, as I would call it, delivers far more impactful outcomes compared to solely giving farmers more money in the form of loans and grants.

Yes, access to credit is important but it is not the only solution. We need to equip farmers with affordable inputs in a timely manner and the know-how to develop their farms using modern methods.

On financing, we should explore various options such as group lending, joint liability and other forms of social collateral.

The eligibility criteria may vary depending on the product but factors like creditworthiness, farming track record and ability to repay will still come into play.

However, the idea is to provide credit tailored to the unique needs of the recipient with a view to empowering their farming enterprise to grow and achieve its full potential.

For instance, by offering flexible agribusiness loans repayable in bullets, that is the entire lump sum at maturity, or through moratoriums that ease the pressure of initial repayments to help them focus on improving production and hence the ability to repay the loan.

On the issue of farm inputs, a proven financing strategy entails working with pre-approved suppliers to provide farmers with things like seeds and fertiliser, especially during the rainy season when they need them most, thus maximising crop yield and income.

In many cases, especially with cash crops, payment delays mean farmers cannot buy much-needed inputs on time.

But with innovative agribusiness financing solutions, financial institutions can work with agro-dealers and other supply chain actors to resolve this challenge.

On knowledge and skills, financial lenders need to support training and capacity-building programs covering innovative farming techniques, financial literacy, effective farm management skills, and the use of technology to track production and source markets.

This will improve the efficiency and resilience of small farmers, but more importantly, create knowledge-based sustainable farming ventures and livelihoods.

The triple-value model will in addition to addressing the barriers noted above, also propel the transition of small-scale agriculture in Kenya from mainly subsistence to innovative, commercially viable enterprises.

As a financial institution, Faulu Microfinance Bank has successfully embraced this model in line with its strategy of contributing to improved food security in Kenya through innovative agribusiness financial solutions.

As a bank, we finance farmers to acquire farm and livestock inputs. We have also partnered with farm input and equipment suppliers, branded as Faulu Kilimo Centers, where farmers can access financing for various inputs.

Through our partners, we organize capacity-building programs covering innovative farming techniques, financial literacy, and effective farm management skills.

Through bancassurance, we help our clients access crop and livestock insurance.

The three factors - credit, inputs and knowledge – must be at the heart of improving the fortunes of our farmers.

Ouma is the acting chief executive of Faulu Microfinance Bank.