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Financial services company offers new loan access for exporting farmers


FACTS, a financial institution that offers invoice discounts to exporters, has announced a collaboration with the Fresh Produce Consortium of Kenya (FPC Kenya) to offer 80 per cent financial cover on the invoice value of export commodities, without collateral, it announced this week.

The move opens up a new level of financial access for farmers and agricultural traders who are venturing into exports, with most agricultural finance options in the country previously asking for extra security or collateral, such as existing savings or title deeds.

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Financial institutions, such as banks, have been particularly reluctant to lend to farmers and agricultural businesses without collateral that in most cases is higher than the loan amount. But few farmers and exporters have such collateral, and where they do, they are more likely to use it to finance their operations than leave it untouched and borrow from banks at interest rates averaging 12.67 as of August 2019.

For these reasons, with most finance routes effectively blocked for agricultural producers, FPC Kenya and FACTS have now partnered to organize the financial support for exporters to pay for their own supplies and costs as they wait for payment of their export invoices.

On payment by the buyers through the FACT system account, four per cent interest per month is deducted on the full invoice payment and the rest wired to the exporter. 

The export payments are usually made between 30 to 90 days after the produce is sent.

However, the new offer by FACTS has been made possible by its partnership with Feed the Future, a USAID funded non-governmental organisation, which is expanding loan access for exporters by acting as a partial guarantor (covering a part of payment where producers default) on lending without collateral. Its aim is to promote access to finance and foster the development of Kenya’s agricultural market system through a five year program dubbed the Kenya Investment Mechanism (KIM).

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The KIM program’s main objectives are to increase the utilization of USAID’s  Development Credit Authority partial guarantee mechanism, thus increasing the agricultural financing activity of the authority’s partners institutions, and to mobilise Sh40bn in capital to enterprises working in horticulture, dairy, livestock and clean energy.


Image by The EastAfrican

For finance eligibility, an exporter must have a two years audited financial statements, a minimum turnover of Sh 1,500,000, a sound administrative organisation and be selling on credit.

After meeting the requirements, FACTS carry out a business analysis within 10 working days accessing the risks, opportunities and weaknesses of the business. After analysis, the exporter will upload invoices on the FACTS system as they are issued, and on verification of the buyer’s authenticity funds are disbursed within three days.

To ensure the exporters money is not lost to dubious buyers, FACTS also carry out background checks and advise their clients on who to do business with.

Speaking during its members’ sensitization workshop last week, FPC chairman Okisegere Ojepat said: “This partnership will unlock financial potential for exporters who would like to expand their businesses or are having financial constraints and will make agriculture attractive for the youth if fully embraced.

”He also urged financial service providers to look into their policies and ease requirements on agricultural loans as these were locking out many investors and exporters from agricultural activity.

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FACTS country’s director Mutiso Ndambuki noted that the institution will also be giving consultancy services to its clients on new business trends, risks, opportunities of the business and connecting them to other people with the same business interests to facilitate knowledge transfer between the parties.

“We are not only interested in making money, but also with the clients’ wellbeing and that’s why we tailor loans that are customised for each client and provide consultancy services to ensure their business is at par with new trends and business opportunities they can tap into,” he said.

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