By Brian Moseti
Farmers are among the professionals in Kenya that financial institutions are looking to support as the Corona Virus Disease 2019 (Covid-19) continues to take its toll on the economy.
Speakers at a webinar organized by the Kenya National Chamber of Commerce and Industry (KNCCI) and Working Capital Associates to discuss Kenya’s supply chain disruption and financing options, identified agriculture as one of the critical sectors for economic stability, noting that it deserves great support in these virulent times.
Prior to the disruptions brought about by Covid-19, the country’s agricultural industry was facing bleak times as the worst locust attack in 70 years threatening to wipe out vast areas of crop lands, as some areas of the country struggled with drought.
The Covid-19 pandemic worsened the woes for the country’s farmers as it introduced a break in input supply chains, while damaging access to markets.
However, an increasing demand for locally produced food items arising from a closure of borders, has positioned farmers as critical players in the realignment of the economy.
“For some time, agriculture has been a sector that most financial institutions have approached with caution because it is full of uncertainty, complexity and ambiguity. However, food producers, processors and distributors are among the winners during the Covid-19 pandemic as food remains a critical resource for driving the economy. It is for this reason that we are developing products that increase financial access including better credit facilities,” said Simon Ndung’u, Head of Retail at Family Bank.
Philanthropic groups are also teaming up with financial institutions to develop products that increase the access to financial support by players in small and medium-sized enterprises (SMEs), amongst whom are a majority of the country’s farmers.
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George Apaka, Lead Agriculture Sector at Mastercard foundation, says that philanthropies are helping in the development of blended finance products as a way of improving the access to finance by players in the agricultural value chains.
“We are giving grants for entrepreneurial capacity building, and in this regard we are working with the country’s banks to develop risk-sharing mechanisms, including some that require us to take up 40-50% of the risk portfolio. We understand the apprehension that has been there for groups like smallholder farmers – most cannot show an ability to pay, quite often due to poor record keeping, but with the kind of de-risking strategies we are advocating for, they can now get proper financial inclusion,” he said..
Similarly, players in the trade finance environment are eager to support domestic and international trade transactions, with farming enterprises being among the most cherished groups as demand for their products soars around the world.
“Trade finance is a good place to start for those looking for players in the exports and imports environment, and we are always willing to offer our support,” said Andrew Darling, Head, Structuring and Operations at Working Capital Associates.
Smallholder farmers constitute almost three quarters of Kenya’s working population and produce 80 percent of the food consumed in the country. Apaka says that if the group is not properly supported, there could be great repercussions on the country’s overall economic performance.
“The Covid-19 pandemic began as a health crisis that is now turning into a food shortage situation. However, even with an increase in food demand, farmers can only produce more if incentivised through support for the acquisition of inputs and access to working capital for other farm processes. Failure to take this into account could lead to scaled down growth in economic performance because agriculture accounts for most of the Gross Domestic Product (GDP) in the region,” he said.
Meanwhile, Apaka, Ndung’u and Darling encourage farmers and SME players to contact their respective institutions for financing.
“We are accessible on digital platforms and in 90 branches around the country – we have not changed our loan requirements, and qualified candidates will always get our support,” said Ndung’u.
Apaka noted that the Mastercard Foundation has established a Covid Resilience and Recovery Program, a funding program whose requirements can be accessed through the organization’s website (https://mastercardfdn.org/covid-19-rrp-qanda/).