informing and inspiring farmers informing and inspiring farmers

July 2016 July 2016

12 13

By Mwangi ndiRangUndirangu@smartfarmerkenya.com

Farmers can finally envisage a fu-ture where they will walk into a financial institution with a viable

agribusiness proposal and get a loan to fund it processed within minutes.

This follows a move by development partners, Kenya Government, finan-cial institutions and the Central Bank of Kenya to explore ways of eliminat-ing stumbling blocks that hinder many banks from investing in agribusiness.

For many years now, farmers have been facing various hurdles in access-ing loans. Majority of banks consider the farming community a risky group to lend money to since a good number of them lack trusted collateral and record keeping skills.

But this scenario is bound to change in coming days as the agricultural sec-tor continues to draw more attention from key decision-makers locally and globally.

Financial access has been identified as a major barrier for potential farmers, including youth and women, seeking to venture in one of the largest economic sector in the country.

Kenya’s Agriculture, Livestock and Fisheries cabinet secretary Willy Bett la-

ments that while agriculture contributes to 26 per cent of the country’s Gross Do-mestic Product and employs up to 80 per cent of the rural population, many com-mercial banks have been shying away from financing the sector.

Agricultural lending amounts to hardly more than three per cent

of loan portfolios of the entire financial sector with banks, Micro Finance Insti-tutions and SACCOs giving this sector a wide berth.

“Agriculture has been a victim of bias where we look at it as a rural enterprise. This we need to correct immediately since there is no doubt that it is a very lucrative sector. We are putting strong measures to encourage lending and I am happy to report that some banks are slowly changing their attitude. They have come up with products specifically targeting the farming community,” said the cabinet secretary.

He promised to appeal directly to Cen-tral Bank to prod more banks into sup-porting the agricultural sector.

“I think we should employ more agri-culturalists in the banking sector to help demystify this notion in a practical man-ner. Personally I will be visiting the Cen-tral Bank Governor to ask him to prevail upon commercial banks to stop being too strict when asking for collateral, so that we can revolutionalise agriculture in the country,” he said.

Central Bank Governor, Patrick Njoroge, called for the establishment of a borrower-friendly lending programme with innovative products to suit the farming community.

“There is always a bias when dealing with a farmer. In the mind of a banker, a farmer is that person who drives an old pickup and wears a stained white shirt and has no idea how to keep farm re-cords or balance books of accounts,” said

Bright future for farmers as bankers move to improve lending

Financing the farmer

In the mind of a banker, a farmer is

that person who drives an old pickup and wears a stained white shirt and has no idea how to keep farm records

Mr Maarten Susan (left) of FaCTS, Cabinet Secretary Mr willy Bett and Kimberly Tilock of global CommunitiesPHOTO|MWANGI NDIRANGU

agriculture Ministry, Central Bank of Kenya, bankers association and development partners call for an end to banks’ mistrust for farmers

Dr Njoroge.The minister and the governor spoke

during the launch of Certificate in Ag-ricultural Finance (ECAF) at the Kenya School of Monetary Studies, Nairobi in early June. The ongoing training tar-gets 140 lending officers drawn from various financial institutions across the country.

The campaign to make more farm-ers access loans is spearheaded by Global Communities, an international non-profit organisation that has now brought on board various local and international partners to improve the lives and livelihoods of vulnerable com-munities, including farmers.

“It is our hope and expectation that this training course will enable the financial institutions to make loans available to more agribusinesses and help this critical sector to have the sup-port it needs to meet the economic and food needs of Kenya, Malawi and Tan-zania,” said Ms Kimberly Tilock, Global Communities Country Director during the ECAF launch.

Ms Tilock said through ECAF, they seek to improve the skills and knowl-

edge of agribusiness staff in financial institutions in East Africa to encour-age greater lending to the agriculture sector.

During the function, Kenya Bankers Association CEO Habil Olaka observed that poor lending to the agricultural sector was not only a Kenyan phenom-enon, but cuts across Africa.

Noting that the sector provides liveli-hoods to more than 60 per cent of Afri-ca’s population, the CEO said it attracts less than five per cent of lending from the continent’s financial institutions, leaving farmers and agricultural enter-prises starved of the capital they need to operate and grow their businesses.

ECAF has been funded by the Agri-business Investment for Market Stimu-lation (AIMS)− a five-year programme funded by the US Department of Ag-riculture and implemented by Global Communities to grow the agriculture sector in East Africa.

The programme builds on the re-gional expertise of Kenya School of Monetary Studies in Agri-finance train-ing and on the Finance4Agriculture (F4A) programme.

Banks to design friendly collateral terms suitable to agricultural investors

global initiative launched to address funding limitations on farming communities with organisations such as Bill & Melinda gates Foundation coming on board

Banks to create forums to interact with farmers to have a better understanding of agribusiness

government to link producers with markets with a view of encouraging contract farming

Legal procedures towards financial access to be simplified

a borrower friendly lending programme to be initiated in financial institutions with focus on agribusiness

Farmers to be encouraged to insure their investments to win bankers’ confidence on lending

Efforts to make financial access easier to farmers