Kenyan government to inject US$14.1m into state-owned agriculture finance institution

KENYA – The Kenyan government is set to inject Ksh.1.5 billion (US$14.1m) in the next three years to the Agricultural Finance Corporation (AFC), a wholly owned Government Development Finance Institution that supports farmers.

The financing will enable AFC to further its programmes, including credit extension and technical assistance to clients covering agriculture, rural development and food security.

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Describing it as a strategic investment in a public enterprise, the Treasury has set the target for the year starting July as Sh500 million (US$4.7m) and another Sh1 billion (US$9.4m) in the next two years, reports Business Daily.

“The amount of capital injected and absorbed into the strategic State-owned entities (AFC) [is targeted at] at Sh500 million (US$4.7m) for 2020/21, Sh500 million (US$4.7m) for 2021/22 and Sh500 million (US$4.7m) for 2022/23,” said the Treasury.

In a concept note on on-going programmes, especially to promote women in the agribusiness, the AFC says it is looking for partners to aid in increasing the funding of its clients through concessional credit, risk-sharing, grants and technical assistance.

“To facilitate a successful deployment [of loans to women], the corporation is looking for partners, to assist through financial concessional credit lines, guarantee mechanisms, risk-sharing facilities, innovation funds, grants for technical assistance and even grants for enabling environment and infrastructures like post-harvest handling at communal levels to generate confidence in warehouse receipts systems. This could benefit many smallholder farmers most of who are women,” says the AFC.

The organisation is promoting loaning of the cash to female-led enterprises as part of its Women Affirmative Action Window.

The initiative is motivated by the success of other initiatives notably that between the Kenyan government and the International Fund for Agricultural Development, which is implemented through the Alliance for Green Revolution in Africa.

The AFC became involved in the affirmative action initiatives after realising its loans had mainly benefited men with only five per cent of its lending going to women — largely because women did not have hard collateral in the form of land.

“Through the years, AFC has been loaning using ‘hard’ collateral in an effort to safeguard the taxpayers’ investment…This among other reasons has gravitated loaning largely to men with less than five per cent of total loaning going to women through the years.”

“This data has troubled AFC and it’s the basis upon the rethink of how better to include women in agricultural finance in Kenya,” says the agricultural sector financier.

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