The Agricultural Finance Corporation (AFC) has tapped a Sh600 million loan from the Kenya Development Corporation (KDC) for onward lending to pastoralists.
KDC is a State-owned development finance institution established in November 2020 to merge the operations of the former Industrial and Commercial Development Corporation, the Tourism Finance Corporation, and IDB Capital Limited.
The company is implementing the De-Risking, Inclusion, and Value Enhancement of Pastoral Economies programme with support from the State Department of Livestock, Zep-RE, and the World Bank.
AFC will use Sh300 million to lend to pastoralists under the programme.
Another Sh300 million will be disbursed under the Supporting Access to Finance and Enterprise Recovery (SAFER) project, which finances micro, small, and medium-sized enterprises (MSMEs) to support their continued recovery from the effects of Covid-19.
According to KDC, the lending to AFC will enable the latter to utilise its decades-long expertise in lending to farmers.
“This underscores our resolve to provide the much-needed financial support and infrastructural development that will empower our pastoral communities,” said AFC managing director George Kubai last week.
“Through SAFER, we are committed to increasing access to financial services, enhancing capabilities, and supporting the recovery of MSMEs across the country,” added Mr Kubai.
KDC director-general Norah Ratemo said the two projects had disbursed Sh730 million and Sh300 million, respectively. The loans to pastoralists and businesses will attract annual interest rates of between nine and 10 percent, said the AFC.
The government established the AFC in 1963. It provides farmers with loans at a 10 percent interest rate. This makes it one of the cheapest lenders in the market, even as interest rates charged by commercial lenders continue to rise.
The company has, however, been facing a twin problem of low funding and a high default rate, thereby constraining its operations.
The lender faces a default rate of 31 percent, which is more than double that of commercial banks.
The State-backed lender recently revealed it receives applications for loans worth about Sh15 billion annually but approved about Sh4 billion, leading to a deficit of Sh11 billion.
