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CBK petitions banks to raise agri-funding

By By Fredrick Obura | February 2nd 2013

By Fredrick Obura

Central Bank of Kenya (CBK) is courting financial institutions to lift funding to agriculture to boost food production.

CBK wants the Government to address marketing, buying farmers’ surplus, commodity exchange, and future markets, and the concept of receipt warehousing to open credit avenues to farmers.

“There are no quick fixes and the provision of sustainable financial services for agriculture has proven to be difficult,” CBK Governor Njuguna Ndung’u said.

Access to credit has been cited as one of the hurdles to commercial agriculture and a key contributor to perennial hunger in Kenya.  “The past years have demonstrated that neither commercial banks nor the emerging micro-finance industry are willing to sufficiently meet the financial needs along agricultural value chains, leaving farmers in the hands of costly middlemen interventions,” he said.

Agriculture has been viewed as a ‘high risk’ venture given its peculiarities such as susceptibility to unfavourable weather conditions. Financial institutions shied from agriculture funding due high loan defaults forcing them to write off billions of shillings in bad debt.

  “There is broad consensus that existing mechanisms for agriculture finance are not adequate and we need to move to innovative and market-based approaches that are scalable and can reach a large number of beneficiaries.”

  “The transition would better be fast tracked if we addressed the many challenges smallholder farmers are facing, buy their surplus, build receipt warehousing concepts, then commodity exchange and future markets for success.”

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 Prof Ndung’u was addressing the incoming executive committee of the African Rural and Agricultural Credit Association (Afraca) whose members are drawn from various institutions within the Sub-Saharan Region.

 For the next two years, the committee will be hosted at the Kenya School of Monetary studies. The key role will be to provide strategic and policy advice to the Afraca secretariat in addition to supervising and monitoring all activities under their mandate.

 Mr Millison Narh, Deputy Governor Bank of Ghana called on the new officials to  embark on strengthening school’s regional Certificate in Agriculture Finance (CAF) through recruitment of participants, and focus on pillars on production, processing and storage to boost food security in the Kenya and beyond.

 He called on the Kenya School of Monetary Studies to exploit Afraca’s bilingual capacity to translate and deliver the Certificate in Agriculture Finance to Francophone Africa. 

“Afraca should also use the Kenya School of Monetary Studies Research Centre to undertake empirical research geared towards rural development,”

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