State boosts food security with Sh2b agribusiness fund

By LILLIAN KIARIE

The move to establish a Sh2 billion agribusiness fund to de-risk and leverage commercial bank’s lending to smallholder and commercial farmers is set to boost food security

National Treasury Cabinet Secretary Henry while presenting 2013/14 budget in Parliament last week said the State will revitalise agriculture to expand and enhance productivity.

 This, it argues, will transform agriculture into a business venture. “In this regard, Sh2 billion is set aside for an agribusiness fund to de-risk and leverage commercial bank lending to smallholder and commercial farmers throughout the country,” said Mr Rotich.

“We plan to scale this Fund to Sh20 billion by the fourth year to expand its access to as many Kenyans who venture in farming as a business.”

Farm inputs

Rotich said the use of inappropriate technology, inaccessible farm inputs and weak extension support services have led to low agricultural productivity. This has been worsened by over reliance on rain-fed agriculture.

“To deal with the perennial challenges of food insecurity and to reduce cost of living associated with high food prices, the Cabinet Secretary for Agriculture will also allocate Sh8 billion to implement the on-going irrigation projects nationally and 3.6 billion to implement the first Phase of the one million acre irrigation and food security project in Galana,” Rotich added.

Lack of affordable and accessible credit has also  hindered growth of the sector, deterring growers from reaping huge benefits out of commercial farming.

PKF Chief Executive Officer Atul Shah lauded the Government for allocating more resources to finance development flagship projects.  “Though, there are no immediate cuts on prices of commodities, the State’s commitment to invest more on coffers like the Youth Fund, Women Fund, SME Fund, and the new Agribusiness Fund will empower people to be financially independent and self-reliant,” he said.

Shah added that encouraging youth to venture into enterprises was one way of creating employment, which is essential since the job market could not accommodate all of them.

Under the fund, farmers will be advanced credit to undertake crop production, including farming, contract farming, seed supply, agro-chemicals, farm machinery, processing, marketing, retail sales among others.

 The State will provide Sh2billion to guarantee commercial banks so that the latter can advance credit to majority of farmers in the country at rates lower than the current market lending rates. 

Commercial banks currently lend  loans at a minimum of 17per cent while credits unions offer credits at 12 per cent on a reducing balance. Country Director for Africa Agribusiness Academy Mr Charles Gitau points out that this structure will provide a healthy engagement between farmers and lending institutions.

“Several banking institutions are not promoting uptake of loans to farmers despite having guarantee from Government. Farmers are  also reluctant to use land titles as collateral,” he said.

Monetary policy

According to World Bank Kenya Report 2012,  declining inflation and interest rates will loosen monetary policy to stimulate growth. Paul Mbuni, Chairman Kenya Society for Agricultural Professionals said the  agribusiness fund would provoke investment in agriculture.

“The challenge will be policing commercial banks and it would be prudent for Treasury to disburse the money through agencies like the Agricultural Finance Corporation. The cabinet secretary in charge of agriculture ought to ensure the money is accessible to as many farmers as possible,” he said.