PROFIT deal aims to deliver $100m more in farmers loans

The Kenyan government has signed an agreement with the Alliance for a Green Revolution in Africa (AGRA) in a bid to increase loan financing for farmers countrywide by a further $100m.

The six-year Programme for Rural Outreach of Financial Innovations and Technologies (PROFIT) is a scale-up of an existing initiative where a risk sharing facility of $5 million was provided by AGRA, the International Fund for Agricultural Development and the Kenyan government to Equity Bank.

Rural farmers have traditionally suffered from a lack of access to microfinance, with institutions facing high costs of operating in more remote areas and thus largely ignoring them, at the expense of rural farmers who need finance. These microfinance institutions serve only 17.9 per cent of the target population. The existing funding scheme has helped acquire $50 million of financing for over 49,000 smallholder farmers in the form of direct lending for farm inputs that can help a farmer move away from subsistence to sustainable agribusiness. The new PROFIT initiative will add an additional $10 million in funds for risk sharing instruments and is expected to scale up financing by banks with the aim of leveraging close to $100 million of credit finance for smallholder farmers.

“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,” said Joseph Kinyua, Permanent Secretary at the Ministry of Finance. “We are addressing these challenges in order to improve the plight of poor farmers.”

The PROFIT program has provided $7 million for microfinance institutions that want to expand their rural and agricultural portfolios, while also allocating $5 million for technical support and capacity building to banks and borrowers with limited business knowledge. A further $2 million is available in the form of an innovation facility to promote the use of technology in financial outreach, and will be used to pilot innovations that support rural farm financing. Some $2 million more is available to facilitate training and asset creation for the unbanked, women and youth.

The targets of these funds are smallholder farmers, pastoralists and fishermen, as well as women and youth. Though the project is designed to cover the whole country, rural areas are the main focus. Through improved production, productivity and marketing PROFIT hopes to increase the incomes of such groups, providing finance for them to invest in their businesses.

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

“Innovating financing approaches 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.”

Written by Tom Jackson for African Laughter