Kenya: Govt Partners with AGRA to Improve Farmer Incomes

By NewsfromAfrica

Nairobi-– The Alliance for a Green Revolution in Africa (AGRA) Thursday signed a Memorandum of Understanding (MOU) with the Government of Kenya seeking to scale up access to agricultural financing in the country. The Programme for Rural Outreach of Financial Innovations and Technologies (PROFIT) is a six-year development program whose goal is to contribute to the reduction of rural poverty in Kenya.

The program is expected to boost access to financing for smallholder farmers across Kenya by a scaling up a similar initiative currently running in Kenya, where by a risk sharing facility of $5 million was provided by AGRA, IFAD and the Government of Kenya to Equity Bank. The existing scheme has helped leverage a total of $50 Million of financing and has so far benefitted over 49,000 smallholder farmers in the form of direct lending for farm inputs.

Through the newly announced PROFIT initiative, IFAD and the Government of Kenya will avail an additional $10 Million to be used in the form of risk sharing instruments. The money is expected to scale up financing by a number of Kenyan banks and Micro-Finance Institutions with the aim of leveraging close to $100 million of new credit financing mainly targeting smallholder farmers.

A credit facility of $7 Million will also be provided under the PROFIT Program, targeting Deposit Taking Micro-Finance Institutions that may need immediate access to funds for expansion for their rural and agricultural portfolios, but may not have financial leverage capacity. In addition, the Program also recognizes the need to promote the use of technology in promoting financial outreach. In this connection, an Innovation Facility of $2 Million has also been availed to develop and pilot-test innovations that use technologies in the financial sector to support rural financing.

The PROFIT Program has also allocated $5 Million in the form of technical support and capacity building to banks and also for beneficiaries with limited business experience, and to strengthen the management and governance of selected rural Savings and Credit Cooperatives Organizations to enhance their efficiency.

In addition, the Program is extending a further $2 Million in the form of a Financial graduation facility to facilitate financial graduation interventions targeting the unbanked through skills training and asset creation for vulnerable women and youth.

“The majority of our small-scale farmers continue to face difficulties in accessing affordable credit and we, the Government of Kenya and key partners like AGRA, are doing something about it. We are addressing these challenges in order to improve the plight of poor farmers,” said Mr. Joseph Kinyua, Permanent Secretary, and Ministry of Finance.

“This program will avail affordable credit to small-holder farmers so that they can buy fertilizers and other inputs to improve farm productivity, enhance their food security and expand their income base. The initiative is therefore expected to make a major contribution towards efforts to eradicate absolute poverty and provide for national food security,” he said.

The programme targets smallholder farmers, pastoralists, artisanal fishermen, women, landless labourers and youth, and is designed to have national coverage with special emphasis in rural areas of Kenya. The core objectives of PROFIT are to increase incomes of the target group as a result of improved production, productivity and marketing in the various rural enterprise sectors. This is achieved through sustained access to a broad range of financial services and capacity building for poor rural households.

“Innovating financing approach to agricultural financing is already having a meaningful impact in Kenya by leveraging financing to small scale farmers, thereby lifting rural families out of poverty by helping them improve their production and productivity and by connecting them with new markets,” said Jane Karuku, President of AGRA. “AGRA’s support of PROFIT aligns perfectly with our core objective of tackling poverty in Africa by creating sustainable agricultural growth and improving the productivity and livelihoods of smallholder farmers.”

“Through this initiative, AGRA and the Government of Kenya will scale up the innovative financing models and apply interventions of risk sharing instruments through the Program’s component of Rural Outreach and Innovation to work with more banks to leverage additional financing to the agricultural sector especially to the smallholder farmers,” she said.