The current state of access to Agri-Finance in Kenya

Kenya’s financial market is well-developed compared to other parts of East Africa. There are a variety of services available, such as credit and loans, savings and payments from commercial banks and micro-finance institutes (MFIs), savings and credit cooperative societies (SACCOs), and mobile-based transfer services like M-PESA. The use of these services by Kenyans has tripled over the past decade, thanks in large part to fintech which has allowed for bank accounts to be linked to mobile money. However, financial services in the agriculture sector are lagging behind other sectors in terms of savings and lending patterns.

Agribusiness is not a popular choice for financial services. Financial services for micro, small, and medium-sized enterprises (MSMEs) in agriculture are questionable. Although MSMEs provide 80% of the food consumed in Kenya, most operate informally and are vulnerable to shocks. Kenyan farmers and agribusinesses have recently faced erratic weather, floods, fall armyworms, and desert locust invasions. They also had to deal with mobility restrictions and supply chain disruptions due to COVID-19. However, Kenya’s food system urgently needs investments and innovations to ensure sustainable access to healthy food for all.

Is there hope?

Digitalization is revolutionizing the delivery of traditional financial services to Kenyans. Can this also be applied to making financial products safer and more tailored to farmers and agribusinesses? New digital products for farmers and agribusinesses are emerging, such as weather station and satellite-based insurances, area-yield indices insurance, and livestock and crop insurances. Programs like the Kenya National Agricultural Insurance Program, Global Index Insurance Facility, Kenya Livestock Insurance Programme (KLIP), and ACRE Africa offer opportunities to learn, collaborate, replicate, and scale solutions across the food system. Going digital can help farmers connect with quality input suppliers, diversify their markets, and access information, all crucial in sustaining their financial resilience. It can also mitigate risks and break the vicious cycle of debt and challenges caused by supply chain disruptions and costly social demands.

Agribusiness and regenerative agriculture require systems leaders who can identify financing opportunities in both the public and private sectors. Building relationships with financial institutions and changing opinions about agri-finance are recommended. Investigating new digital products that are accessible and inexpensive for MSMEs and shifting the balance from risk to reward can help shape Kenya’s agri-finance future.

Joining the African Food Fellowship cohort of change-makers in the Kenyan Agri-finance space presents an opportunity to synergize efforts with peers focused on inclusive aquaculture and micro and small enterprise in horticulture. This cohort is committed to developing inclusive solutions for MSMEs. Here are some of their reflections on their Fellowship journey:

“I am now able to view my work through a wider system perspective. I am focusing on improving digitalization in the agriculture sector and hope to focus on the policy aspects and develop scenarios using different data. I have also engaged with Smart Market for Fish in Kenya which has enabled me review and look at the wider system, the partners involved, the changes required and how they can be leveraged.”

Agri-Finance Fellow, Kenyan Cohort 2021.

“As a technical person, its easy to get lost in the digital jargon. This fellowship has helped me under the food system, understand the position of work in the system which goes beyond the geospatial technologies. I want to support mechanisation, precision agriculture, data driven decision making to reduce labour intensity and monotony in the agriculture value chain. The fellowship has taken me out of my cocoon to see the dynamics across the value chain and provided avenues to understand the complexity and uncertainties in our food system”

Agri-Finance Fellow, Kenyan Cohort 2021.

Are you ready to emerge as one of the architects of Kenya’s future Agri-Finance sector? Apply to participate in the African Food Fellowship.

Sources of information

• FSD Kenya. 2017. Creating value through financial inclusion: FSD 2016 to 2021 strategy brief. Nairobi, Kenya: FSD Kenya.
• Rampa, F., & Dekeyser, K. (2020). AgrInvest-Food Systems Project–Political economy analysis of the Kenyan food systems: Key political economy factors and promising value chains to improve food system sustainability. Food & Agriculture Org.
• Wattel, C.J. and Savelkouls, C., 2018. Access to finance for small and medium-sized family farms in Kenya: How can it be improved? (No. 4).
• African Business. (2020, March 9). How is repeal of interest rate cap affecting Kenya’s economy?
• Ingrid Coninx, Researcher – Regional Development and Spatial Use
• Kate Hyder, Director of Innovation, Root Capital