Farmers struggle to buy inputs for planting season

By James Anyanzwa

A state of panic is creeping in the agricultural sub-sector over the capacity of government-owned Agricultural Finance Corporation (AFC) to bail out farmers ahead of the maize-planting season in March.

This comes even as commercial banks remain tight-fisted with credit to farmers, partly because of the erratic rain patterns and high risks involved in the agricultural sector.

"AFC is not able to lend as expected," a long-standing large-scale maize farmer and former senior government official told the Financial Journal, adding that the Government has not allocated any money to the corporation in the last two years.

The Kenya Society for Agricultural Professionals (KESAP) said the parastatal certainly did not have adequate funds, while commercial banks were reluctant to lend to the agricultural sector.

"As a result, there is now some kind of credit crunch in the sector. There are no funds flowing into the sector," says Paul Mbuni, national chairman, KESAP.

Small loans

It is emerging that the 47-year-old parastatal is concentrating on small-scale farmers whose produce does not contribute significantly to the country’s strategic grain reserves (SGR).

The SGR have since plummeted from a high of six million bags of maize in 2007 to as low as 2.5 million bags.

This is against the Government’s plans to increase the minimum threshold of the SGR from four million bags to eight to boost food security.

The crisis has been exacerbated by theavy rains that have wrecked havoc most parts of the country.

It is feared that the current heavy downpour, together with farmers’ meagre earnings, might disrupt farming activities and further escalate the biting food crisis.

Farmers’ accessibility to inputs is at risk owing to the inability to secure credit from the under-funded corporation.

Farm inputs

"The rains are here, and are affecting agricultural operations across the country. They can have a significant impact on harvest but at the moment, we require more than rain. We also want farm inputs," says Mbuni.

Already, the rains have disrupted land preparation in some regions including the North Rift and upper western, the country’s major grain basket, which produces close to 10-12 million bags of maize during the peak season.

"The farmers who suffered a poor harvest after borrowing from AFC should be given a relief to repay their loans at a later date," said source who declined to be mentioned.

Mr Mbuni underscores the need to restructure AFC to a fully-fledged farmers’ bank in order to address the financial woes facing the farmers.

"Even if AFC received support from the Government, the funds are not enough," says Mbuni adding that it is important the government looks at the supply side of food production."

Efforts by FJ to obtain comments from Zakayo Magara, the corporation’s acting managing director proved futile as he was said to be locked up in board meetings. Dr Romano Kiome, PS ministry of Agriculture failed to return our calls.

Last year, a cross-section of MPs petitioned President Kibaki to order the ministries of Finance and Agriculture to bail out farmers who could not repay loans.

It is estimated that farmers owe AFC up to Sh1 billion, while that owed to commercial banks amounts to hundreds of millions.

In 2002, the Government in a rescue package wrote off loans owed by farmers.

Rescue package

The MPs wanted the Government to come up with a rescue package for farmers who lost money they invested in crops due to bad weather.

They also asked the Government to evenly distribute free planting material across the country to enable farmers take advantage of the rain.

During the 2002-2007 period of Kibaki administration, AFC is said to have received a measly Sh260 million from the exchequer.

About 80 per cent of the maize channelled into the country’s strategic grain reserves originates from Trans Nzoia, Uasin Gishu, Lugari and parts of Pokot and Nandi.

AFC, a State-owned non-bank development financing institution created in 1963 is supposed to provide customer-focused financial services for the development of the agricultural sector.

The corporation is authorised to develop the agricultural industry, by making loans to farmers, cooperative societies, incorporated group representatives, private companies, public bodies, local authorities, among other entities involved in agriculture.

AFC collapsed in 1990s due to non-repayment of debts and political interferences but it was later resuscitated after receiving Sh1.3 billion from the exchequer.

Although agriculture is the mainstay of the economy, the sector has experienced low productivity over the years, due to poor access to agricultural finance.

According to Egerton University’s Tegemeo Institute of Policy and Development, maize production has been declining since 2006 from an all time high of over 34 million bags in 2006 to about 25 million bags in 2008.

This is attributed to drought, post-election violence and high input costs in 2008.

Last year, the failure of 45 per cent of the long-rains crop is expected to lead to a huge production. Last week, the ministries of Finance and Agriculture agreed to extend the 25 per cent duty waiver on maize imports to June.

"The extension is granted to June. That is the Government position," Agriculture Minister, William Ruto said.

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