The government plans to set aside Sh10 billion to provide low-cost loans to farmers to boost crop and livestock production.
Agriculture Principal Secretary Paul Ronoh said the government will make the funds available through the State-owned Agricultural Finance Corporation (AFC) for onward lending to farmers at lower-than-market interest rates.
“We have a big programme of Sh10 billion to ensure AFC gets enough resources to lend to farmers,” Mr Ronoh said Wednesday.
The PS was speaking on the sidelines of the media launch of the Financing Agriculture Sustainably (Finas) Conference 2024 which will take place from March 27-28.
The two-day event aims to bring together stakeholders in the agricultural sector to take stock of the status of financing and investment in the sector and deliberate on the appropriate mechanisms for funding agricultural activities.
This comes at a time when access to affordable financing by farmers is constrained despite the sector contributing the largest share to Kenya’s annual gross domestic product (GDP).
The launch was attended by various private sector financiers who discussed the challenges they incur lending to the agriculture sector.
Agriculture and Rural Development Partners Group (ARD) chairman Andrew McCown said private sector funding into agriculture has been historically low both in Kenya and globally.
“Capital is available, it just needs to be mobilized,” said Mr McCown. He added: “Funding for agriculture is urgently needed because it leads directly to job creation, eradication of poverty and most recently helping the fight against climate change.”
Kenya’s farmers, who are mostly smallholders, are struggling to access financing to invest in their production activities.
The sector has been struggling as a result, a situation that has been worsened by the growing incidences of extreme droughts and increasing cost of farm inputs that the country has been facing in recent years.
According to PS Ronoh, the government’s financing of AFC will help more farmers access much-needed capital.
AFC lends to farmers at interest rates of about 10 percent per annum but faces a high default rate of about 31 percent plunging it into liquidity challenges.
The State-backed lender recently revealed it receives applications for loans worth about Sh15 billion annually but is only able to approve about Sh4 billion, leading to a deficit of Sh11 billion.
“We are also aware of the challenges that AFC is facing in recovering the loans from borrowers and we have notified all the defaulters to pay back their loans so that we can also lend to other deserving farmers,” said Mr Ronoh.
Agriculture registered a growth of 6.7 percent in the third quarter of 2023 compared to a 1.3 percent contraction in the corresponding quarter of 2022.
