Green Financial Revolution Arrives for Kenya's Farmers
NAIROBI, Kenya, May 7, 2008 (ENS) – A new US$50 million partnership to finance Kenyan farmers was launched Tuesday to address both local and global food crises. The funding will allow smallholders and small agricultural enterprises to break out of poverty and build viable businesses.
The Alliance for a Green Revolution in Africa, or AGRA, in partnership with Kenya’s Equity Bank Ltd, the International Fund for Agricultural Development and the Kenya Ministry of Agriculture, established a new loan facility that will start out with a funding pool of $50 million.
The new three year pilot project is intended to speed access to affordable financing for 2.5 million farmers and 15,000 agricultural value chain members such as rural input shops, fertilizer and seed wholesalers, and importers, grain traders, and food processors.
“Unless urgent measures are taken, food insecurity will deepen,” said Kofi Annan, who chairs the AGRA Board of Directors and is the immediate past secretary-general of the United Nations.
Kofi Annan, right, examines seed maize
with Saleem Esmail of the Western
Seed Company. (Photo courtesy AGRA)
“As Kenya rebuilds following a tumultuous period, there are still many challenges ahead,” Annan said. “There are lots of internally displaced persons. Many have lost their lands and ability to produce food. Vast areas of the country now experience challenges of getting access to affordable seeds and fertilizers.”
Equity Bank’s loan facility of US$50 million will operate against a US$5 million “cash guarantee fund” from AGRA and the International Fund for Agricultural Development. This innovative fund would reduce part of the risk of lending by Equity Bank, adding an element of security.
“Equity Bank is proud to be offering this service to the farmers and agricultural business of Kenya,” said Bank Chief Executive Officer James Mwangi. “Farmers are the backbone of our economy. They deserve access to the affordable credit that will enable them to make a profit and continue Kenya’s trajectory of growth.”
The loans will be offered at a 10 percent interest rate per annum. By contrast, other agricultural loans can be charged at an interest rate as high as 18 percent.
AGRA will work with banks across African countries to scale up similar models, said Annan.
As part of the program, the Ministry of Agriculture plans to contribute millions of dollars in subsidies targeted to Kenya’s most vulnerable farmers. Eligible farmers will receive vouchers that they can redeem at agro-dealer shops in exchange for farm inputs. Upon returning the vouchers to Equity Bank, the agro-dealers’ accounts are credited, enabling them to purchase supplies.
“If Kenya is to overcome its maize shortfall and the rising prices of food, farmers and other key players in the sector need to be mobilized. They badly need financial support so seeds and fertilizers can flow into our rural areas, to trigger a production response,” said William Ruto, Kenyan minister of agriculture.
“This program is an essential part of our national Strategy for Revitalization of Agriculture,” Ruto said. “This innovative financing arrangement will help to rapidly get smallholder agriculture back on track to assure food security.”
Kenya’s agricultural sector produces cash crops such as coffee, tea, sisal and sugar. Staple crops include maize, beans and peas, millet, bananas, sweet potatoes and potatoes. Grains, cotton, tropical fruit and coconuts also are grown.
Cattle raising for dairying and for meat is important and hides, skins and wool are produced for domestic consumption and for export.
Kenya’s small farmers will have better
access to financing. (Photo by
courtesy Pride Africa)
In Kenya, agriculture employs over three-quarters of the labor force, but as elsewhere in sub-Saharan Africa, farmers rarely have access to financial services. In 2006 there were only 3.8 million bank accounts in Kenya, a nation with a potential bankable population of 16.5 million.
The program fills a gap in financial services for the farm sector in sub-Saharan Africa.
“Agriculture is the main activity of the rural poor in Kenya, yet most farmers are unable to afford improved seeds and fertilizers,” said Kanayo Nwanze, vice president of the International Fund for Agricultural Development. “This program will finally get them the supplies they need, as well as increase the flow of services and raise incomes across the sector. It is comprehensive.”
The funding facility will work in tandem with AGRA’s other efforts, such as a program to develop thousands of agro-dealers in the region, who will sell affordable farm inputs, such as seeds and fertilizers, to poor farmers in remote rural areas.
“The African green revolution cannot occur unless farmers can access and afford improved farm inputs. And access to finance is a basic, previously unmet, need for farmers struggling to increase their productivity,” said Dr. Akin Adesina, vice president of policy and partnerships for AGRA.
“This partnership with Equity Bank unleashes a financial revolution for Kenya’s poor smallholder farmers, as well as farm input traders, at a scale never seen before in any African country.”