AFC hosts its inaugural investors’ engagement conference

The Agricultural Finance Corporation (AFC) hosted its inaugural investors’ engagement conference under theme “Agricultural Transformation through Financial Inclusion and Innovation.”

The engagement was aimed at bringing together AFC’s key partners to address the challenges facing the agricultural sector and explore innovative ways to bridge the funding gap.

AFC has a mandate to provide affordable credit to the agricultural sector which it undertakes through its branch network spread across the country.

The Corporation receives loan applications totaling over Kshs. 15 billion annually, but is only able to avail about Kshs. 4 billion due to resource constraints.

Notably, the agricultural credit demand for the country is over Kshs. 40 billion annually, indicating a significant funding gap which hinders the productivity and profitability of the sector.

Value chain actors also face the additional challenges of inadequate financing, poor infrastructure, climate change, post-harvest losses, and market inefficiencies.

To address some of these challenges, AFC has collaborated with AGRA and FSD Kenya, to sustainably impact the agri-finance space.

This partnership has seen the development of transformative business models aimed at effectively channeling agricultural capital and risk tools to value chain actors in the agricultural sector.

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These new business models are derived from AFC’s medium-term strategy, its transformation agenda, and the government’s Bottom-up Transformation Agenda (BETA). The models include Wholesale lending, Credit Guarantee, Warehouse Receipt and Mechanization.

Through these lending models, AFC expects to positively impact over 2.6 million agri-players, with a special focus on women, youth, smallholders and agri-MSMEs.

However, this will require an estimated financing of at least a Kshs. 100 billion in the next 5 years to be actualized.

According to the Corporation’s Managing Director Mr. George Kubai, “These models have been developed at a critical time, going by the huge investment needed in the agricultural sector to support its recovery from the Covid-19 pandemic and the ravaging drought”.

“I am pleased to report that in the past 5 years alone, we have disbursed over Kshs. 20 billion to actors in the agriculture sector including MSMEs, women and youth, providing them with sustainable support needed to grow and expand,” added Kubai.

“It is worth noting that the wholesale lending model, which was developed through the support of AGRA, IFAD and the National Treasury, has been tested with eight SACCOs borrowing over KES 1 billion with less than 1% Non-Performing Loans” concludes Kubai.

On his part, Board Chairman, Eng. John Mruttu said that the intervention aligns with the Corporation’s strategic direction, which aims at adopting innovative approaches to serving a larger percentage of agri-players and that the models aim to offer some solutions for mobilization of financial resources for agricultural development in the country.

“The Corporation has a realistic aspiration to reach out to excluded segments including the youth, women and people of the Islamic faith’’, added Eng. Mruttu.

The implementation of these models is envisaged to transform AFC into an apex lender that will not only drive financial access and inclusion, but also attract and de-risk private investments into the agri-sector.

This is a deliberate strategy to support the government efforts and the private sector in rejuvenating the economic recovery in the country.

By Maureen Murengeka