Kenya’s biggest lender by assets, the Kenya Commercial Bank (KCB), has shrugged off risk concerns to allocate Sh35 billion ($350 million) of its credit portfolio to finance agricultural ventures.
The allocation was announced in Nairobi yesterday at the ongoing Alliance for Green Revolution in Africa (Agra) forum in a move aimed at pulling other financial institutions to put money in the sector which accounts for one quarter of GDP.
Terms for the KCB loans were not immediately made public. Banks have long considered the weather-dependent farming among the riskiest undertakings.
Central Bank of Kenya data shows that just 4.04 per cent of the Sh2.165 trillion loans disbursed in 2015 benefited farming ventures. According to a study by the Financial Sector Deepening Trust (FSD Kenya), financing agriculture that would otherwise provide more income-earning opportunities for the poor has reduced.
“Lending to agriculture (the main livelihood source for the poor) has actually reduced. Official data on poverty levels will not be available until 2016 but there is little to indicate that a major, positive shift has taken place,” FSD said.
President Uhuru Kenyatta asked African governments and the private sector to invest massively in agriculture if Africa is to make meaningful progress.
“We all committed to the goal of increasing financing for agriculture. Today, let us make that commitment specific. I propose we pledge to mobilise at least $400 billion of public and private sector investment over the next five years. With goodwill and partnership, this is more than possible,” President Kenyatta said.
Gain access to markets
The Kenyan head of state announced that his government was committed to spending Sh20 billion to support 150,000 young farmers and agriculture entrepreneurs.
The money will go into helping young farmers gain access to markets, finance and insurance, improving access to modern machinery and other agriculture technology and increasing value addition and agro-processing in Kenya.
The third day of Agra forum saw African Development Bank (AfDB) pledge Sh240 billion ($2.4 billion) each year under the Feed Africa programme for the next 10 years which translates to Sh240 billion.
The AfDB has previously been allocating $600 million (Sh60 billion) for agricultural financing. Other pledges were made by Econet Wireless chairman Strive Masiyiwa who intends to invest Sh3.5 trillion ($35 billion) and the Rockefeller Foundation which pledged Sh18 billion.
The Bill and Melinda Gates Foundations committed Sh500 billion ($5 billion), the World Food Program (WFP) said it would set aside Sh12 billion ($120 million) to cater for countries including Kenya while OCP Africa pledged Sh3 billion ($30 million).
Rockefeller Foundation and Bill and Melinda Gates Foundation also gave a pledge to fund the operational cost of the African Green Revolution Forum for the next five years.
Agriculture is Kenya’s mainstay economy and contributed 30 per cent of the country’s Gross Domestic Product in 2015. The Kenyan president said agriculture is too important in Africa to be ignored since hundreds of millions of men and women depend on agriculture to eke out a living.
“But agriculture also provides an avenue for all our nations to open up opportunities for decent jobs, and dignified lives to millions of African youth,” President Kenyatta said.