Where can farmers get affordable loans for their projects?

Agriculture is the backbone of Kenya’s economy. That much is true and that much has been said.

Farming accounts for over 50 per cent of export earnings and approximately 30 per cent of Gross Domestic Product (GDP).

The industry employs over 80 per cent of the population.

It is therefore puzzling that the Central Bank of Kenya’s Annual Bank Supervision Report for 2015 found that agriculture accounted for a paltry 4.04 percent of the gross loans issued by banks.

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To add on that, only 4.8 per cent of commercial financing in Africa goes to agriculture, according to the 2016 Africa Agriculture Status Report.

About 70 per cent of most crop and livestock production in Kenya is by smallholder farmers. Yet, this subgroup is the most disadvantaged in getting financing facilities.

In a 2017 paper by Alliance for a Green Revolution in Africa (AGRA), the situation smallholder farmers find themselves in, can be attributed to four main factors.

First, the lack of credible and verifiable data on transactional income. These farmers also lack collateral that could secure loans.

High-risk

Third, it is difficult for financial services to reach remote rural populations. And lastly, smallholders are considered high-risk because of the nature of the agricultural risks – they are easily affected by the weather.

The most common sources of agriculture financing are financial institutions (commercial banks, microfinance institutions and SACCOs), donors, agriculture-specific firms, corporates, and budgetary resources from the government.

Smart Harvest profiled a few of them to bring forth relevant information of the products they offer and how you can benefit.

1.    ESTHER MUIRURI – Equity Bank and Equity Group Foundation

Associate Director for Food and Agriculture Banking

Do you have financing products for farmers?

Yes. We offer products linked to the value chain. The loans can facilitate a farmer’s work from land preparation to selling their produce.

Talk about specific products at farmers’ disposal.

We have farm input loans – which a farmer can use to buy specific input to aide their work. We also have equipment and machinery loans to finance items like tractors and harvesters. A farmer can seek our working capital loan to export their produce. If the farmer wants, for instance, to sink a borehole, they can sign up for capital development loan.

How are you making it easy for farmers in remote areas access financial services?

We first invested in agriculture by making it a big a department at the bank. Also, young people have specialised products like Kilimo Biashara loan which we are implementing together with Ministry of Agriculture. But also, in 2018 we partnered with Norwegian Agency for Development Cooperation (NORAD) on a project called FASRAT – Financial access for SMEs and rural population in Agriculture. FASRAT is in 27 counties. We travel to the remotest places to talk to farmers and train them to give them new skills and also offer them financial products that suites their needs.

How can a farmer join FASRAT?

Go to any Equity Bank branch and enquire. If it is in your county you will be signed up for free.

How many farmers are taking loan products with you?

On average, we provide financing to between 80,000 to 100,000 farmers per year.

 2.    DAVID MUKARU – Faulu Microfinance Bank

Head of Business Growth

Do you have agriculture-specific products for farmers?

Quite a number. The first one is Kilimo Bora loans: a farmer can access from Sh5,000 upwards. We also have Nafaka loans. This is available to farmers and businessmen dealing with grains. Then we have Green gold loans for tea farmers.

Why should a farmer be eager to take any of these products?

Because each of the products we offer farmers are very specific they are less burdensome. The product is tailored to march the growing season for the crop being produced and the interests adjusted accordingly. Often, the farmer pays up at the end of the season in one bullet amount as opposed to every month or higher frequency.

How are you reaching farmers in remote areas?

Just last month we opened two new branches in Busia and Homa Bay. As we opened those branches we also launched the Feed the Future Kenya Crops & Dairy Market Systems Activity (KCDMS), in partnership with USAid, to provide tailored financial services to farmers in these counties. We hopes to facilitate at least 10,000 farmers within three years.

Do farmers need collateral to access the loans?

No. And this is because we work with farmers through value chains and encourage them to get facilities as a group. Value chain is where a farmer already has a willing buyer with whom they have an agreement on when to sell and at what cost. It goes both ways: the farmer can have their own buyer or we can provide the farmer with a buyer. We do this to de-risk the farmer.

Any advice to farmers on loans?

Be financially literate before taking a loan. We know of cases where around harvest time women with sinister motives troop to farmers after pay day and fleece them of their hard earned cash.

3.    FRED KIIO - Safaricom

Head of M-Agribusiness

Safaricom launched DigiFarm recently: what is it?

DigiFarm is an integrated mobile platform that offers farmers convenient, one-stop access to a suite of information and financial services, including quality products, customised information on farming best practices, access to credit and other financial facilities and access to Market.

How long has it been around?

DigiFarm was launched in October 2017. That makes it slightly over two years old.

Who qualifies for DigiFarm? 

The platform is made for small holder farmers to access anything they would need to produce better from the comfort of their homes through their mobile phones.

How exactly do you interact with a farmer?

Being a mobile driven firm, we interact with farmers through the USSD code *283# and also through the over 200 depots which we have opened across the country.

How many have taken the product up?

Since its launch we have been able to acquire over 1 million farmers on the platform, with over 100,000 loans approved, and redeemed to date at DigiFarm depots. The loan limit varies per value chain per region.

What should you satisfy to get it?

For you to be qualified you have to be mapped to a DVA (DigiFarm Village Advisor) and we also survey your farm in order to obtain GPS data of your location to ascertain how best to work with the farmer.

4.    KELVIN OWINO – One Acre Fund

Africa Communication Associate

Geographically, where does one acre fund operate in Kenya?

We work with farmers in the old Western, Nyanza, Rift Valley and Central provinces.

What type of agriculture financing facilities do you have for farmers?

We provide farmers with asset based credit. This is where a farmer specifies farm input needs – it can be fertiliser, seeds, storage bags, or even animal feed. The farmer would then repay the loan flexibly and should be done paying the amount owed plus interest in about 10 months (at the end of a season).

Do you operate as a grant or a business?

One Acre Fund operates a business. We are an agricultural service provider and not an NGO.

How does a farmer sign up?

We have extension officers in every village in the places I have mentioned. We work with those officers to sign up farmers between September and October every year. We sign up farmers in groups of between 4 and 16. They take a facility with us as a group so that they can keep each other accountable in repayment of the loan. As a result, we do not take collateral from farmers. They don’t need security. We deliver all requested inputs by farmers in January.

Have the farmers been repaying the loans?

We enjoy a repayment rate of 98 per cent. This year alone we enrolled over 500,000 farmers.

5.    VINCENT MARANGU - Co-operative Bank

Director of co-operatives banking division

What types of agriculture specific facilities do you have for Kenyan farmers?

We have farm input loans for buying inputs like fertiliser, agrochemicals, manure and lime. We also have working capital loans: to support production processes like planting, crop husbandry, harvesting, and post-harvest management including transport and processing. Others are capital financing (setting up of Agro processing units) and mechanisation (Asset Finance).

Which farmers do you work with?

We work with all farmers from individual small scale farmer, to small-scale farmers organised in co-operative societies and large scale farmers or even community based groups.

So far, what is the uptake of farming loans?

We support over 3,000 co-operatives and Community-Based organisations with an average of 1,000 to 5,000 farmers and diverse number of individual farmers.

What are you doing to improve uptake of agricultural loans?

We use Supply-Chain Financing model which de-risks the farmers. We also work with stakeholders in the sector insurance companies, agriculturally focused multilateral organisation like USAid and AFD.

How does a farmer qualify for one of the products described above?

Farmers are assessed for credit based on production levels, financial documents, experience in the agricultural activities and use of funds.

How do they improve their chances of accessing the loans? Keep proper records of all stages of your agricultural activities from production to markets.

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