Agricultural Finance Corporation (AFC) has this year, through its revolving fund, so far disbursed over Sh 3.5 billion to smallholder farmers.
AFC is a state-owned development finance institution with a history spanning close to a century and supports the development of the agricultural sector by providing accessible and affordable financial services, which includes asset–backed financing, warehouse receipt financing, and also Digital Financing.
Managing Director, AFC, George Kubai, said they have enabled the smallholder farmers, who would ordinarily be unable to access loans due to a lack of collateral, by ensuring access to credit through Micro Finance Institutions (MFIs) and SACCOs, who employ the co-guaranteeing model.
‘This model allows AFC to penetrate markets and reach out to smallholder farmers to access loans as low as Sh 5,000,’ Kubai, who was speaking on the power of financial inclusion at the ongoing Financing Agri-food Systems Sustainability (FINAS) Summit in Nairobi, said.
The MD however, noted that their target is around Sh 4.5 billion shillings per year and hoped that in the next month before the financial year closes, they should disburse Sh 500 million to reach their target.
“Our Non-Performing Loans (NPL) are looking good; we are within the average of the development financial institutions, averaging around 14 percent, the MD confirmed
Her added that AFC has been working with Ministry of Agriculture and Livestock Development on the Enable Youth program, that seeks to build entrepreneurship in agribusiness through training skill acquisition, and creating an enabling environment that empowers the youth to own profitable agribusiness ventures
In terms of the inclusion, the MD further said they are also working with development partners to basically de-risk most of the youth and also the women by making sure they are included in the financial space.
“The program we are running that is co-funded by the African Development Bank (AfDB) and the Government of Kenya, we have been able to capacity build and give loans to over 262 youths, with a total disbursement of Sh 259 million,” he noted.
The rates of interest, he explained, are below the market rates and below what they are offering as an institution in terms of our actual loan book, and for this, they are trying to look for more resources that can be able to point to the youth and women and make sure that they are financially included.
Apart from youth, Kubai said that women form part of AFC portfolio, and considering women are better payers, as an institution, they have gone ahead and come up with a women-only facility, a women-only product, which basically focuses on the women.
“Our highest portfolio is the dairy sector and livestock, where most of our loan book is sitting, and this is so because if you look at some of our most prolific counties, like in the North Rift, South Rift, and Mount Kenya, on average every home has a cow, and most of these farmers actually are coming for our facilities, and that explains the vibrancy in terms of the cooperative movements in some of those areas.
Kubai appealed to farmers who have taken loans and are not paying to do so, so that they unlock the backlog in terms of the many farmers who are waiting to be facilitated by AFC. “Kindly pay so that you can be able to impact other farmers who are on the waiting list.
The potential of the smallholder farmer in Africa is immense and AFC has been supporting thousands of smallholder farmers who often operate on plots less than 2 hectares and producing a significant share of food, which I essential to national food security
Giving a keynote address on tracking financial flows for food systems in Africa, Director of Food Systems Coordination, International Fund for Agricultural Development (IFAD) Nadine Gbossa, said countries should ensure that food systems are financed, as this will in turn guarantee decent incomes, working conditions, and livelihoods to those who work in the agri-food systems.
She added that African governments should also be empowered with data intelligence on the financing of food systems.
“We are helping countries specifically to have a picture of the financial flows and looking at how development assistance to food systems is looking when it comes to the African region, which is most impacted and the most reliant on development assistance to complement the domestic funding to food systems,” Gbossa said.
The three-day FINAS meeting is looking at how to build sustainable agri-food systems that can nourish generations to come with a call to invest in the right mix of food systems and also rethink sustainable financing for Africa’s food system.
By Wangari Ndirangu
