The government of Kenya and the International Agricultural Development Fund (IFAD), a specialized agency of the United Nations, has established a Sh19.7 billion ($134.05 million) fund aimed at improving access to finance for smallholder farmers.
Principal Secretary to the National Treasury and Economic Planning, Chris Kiptoo said the Kenya Rural Financial Inclusion Facility Project (RK-FINFA) would better mobilize resources from private financial institutions and partner development institutions for allocation to the agricultural sector.
“This will lead to an increase in financial resources at the bottom of the development pyramid while strengthening the climate change resilience of actors in the agricultural value chain,” said Kiptoo.
He said this drive should benefit 190,000 rural Kenyan households both directly and indirectly.
The facility will feature a rural credit guarantee system that will help reduce the perceived and real risks associated with agricultural value chain lending, Mr. Kiptoo added.
Mariatu Kamara, IFAD Country Director and Representative for Kenya said the facility would also provide technical assistance to agricultural value chain players to help them improve their production, marketing, and various other business practices.
The funds allocated to improve farmers’ access to finance in Kenya will be utilized in various ways, including supporting initiatives that link smallholder farmers to banks and other financial institutions to increase access to financing, and to improve the quality and supply of agricultural inputs.
Smallholder farmers make up a significant percentage of the individuals employed in agriculture across developing regions. Yet, most smallholder farmers are also unable to access the financing they need to secure farm inputs.
Smallholder farmers lack basic inputs such as fertilizer, seeds, tools, and the knowledge provided by agricultural extension services to increase their yields. Further, they are also frequently isolated from markets because of a lack of basic infrastructure that would enable them to bring their goods to markets.
Smallholder farmers also suffer from significant post-harvest loss because of a lack of proper storage. These challenges make it difficult for farmers to obtain the best price for their crops by creating pressure to sell as soon as they harvest.
To increase access to finance, donors and development finance institutions (DFIs) should increase the use of official finance to incentivize commercial banks and rural-focused financial institutions.
Improving farmers’ access to finance is crucial for increasing agricultural productivity, reducing poverty, and promoting sustainable development in Kenya. By linking smallholder farmers to banks and other financial institutions, these initiatives can help farmers access credit, purchase agricultural inputs, and improve their yields.
Additionally, providing training, mentorship, and seed funding can help augment the livelihoods of youth in Kenya by providing access to invaluable networks and resources.