A farmer in Homabay has moved from supplying two tons of sorghum to EABL to 35 tons in half-a year providing a market for 130 other sorghum growers thanks to a one million shilling Youth Fund loan.
The loan has also enabled Lucas Olewe to shift from rain-fed to irrigated agriculture by constructing a 450,000-liter water pan and getting into horticulture with two acres of melons, onions and vegetables.
A report on the Status of Access to Agri-Finance by Youth in Kenya found that only 21 per cent of Kenyan youth have access to formal financial services. Notably, 59 per cent of rural youth and 36 per cent of urban youth are excluded from these services.
Established in 2006 as a flagship project under Kenya’s Vision 2030, the Youth Enterprise Development Fund (YEDF) exists to promote youth employment by providing financial and business development support services to youth-owned businesses in the country.
“I’d known of the Youth Fund for years but had never thought of applying for it until I met officials from the fund’s Homabay offices at a youth agriculture meeting in May last year,” informed the 29-year-old farmer based in SubaNorth, Lambwe Valley.
He was encouraged to visit their regional offices at Huduma Center within the Homa Bay County Commissioner’s Office compound and after what he describes as a bit of “back and forth” had his loan processed in two months.
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According to the YEDF website, the Agri-Biz Loan is available to youth who wish to start or expand their agricultural businesses. The loan is available to individuals, registered groups, partnerships and companies owned and run by youth who can access up to one million shillings in loans which attract an eight per cent interest rate and a one per cent processing fee when the loan is issued.
“For anyone looking to apply for the loan, they need to understand that there are two main categories: Individual registered agribusiness loans and group agribusiness loans,” he explained.
Youth farmers who borrowed from YEDF last year were lucky to get six per cent interest rate loans which have been hiked up to eight per cent since the start of the new financial year on July 1st last year.
This rate is however still better than what farmers get from the Agricultural Finance Corporation, 10 per cent and the private sector which gives loans with an interest rate of 12 per cent, Family Bank’s Kilimo Biashara Loan to as high as 22 per cent per annum which is offered by Musoni Microfinance.
To qualify for the loan, Lucas had to show that he had a registered company, provide certified bank statements covering at least the last three months and have his and his company names off the Credit Reference Bureau (CRB) books, and have all the required agriculture licenses and permits.
“Though some counties do not require you to have agriculture permits, in Homabay they are mandatory and I was stamped on which permits these we’re,” he added.
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However, working with the County’s Revenue Office he was advised to apply for a business category permit. For agriculture, this is the Agriculture, Forestry and Natural Resources Extraction permit. Then a business sub-category permit. This is for businesses that hire at least four to ten people and is called the Small Agri-producer, Processor, Dealer permit. Lastly, there is the Agri-products and Processing permit which outlines the activities you are engaged in within agriculture.
Finally, you will need guarantors and security in the form of a motor vehicle logbook, title deeds, stocks, business assets or livestock. “Unfortunately, most young people do not have collateral to guarantee against their loans and fall at this hurdle. However, I’ve seen relatives and even friends of some of the applicants put up their cars as security. Of course, someone will need to absolutely trust you and your farming business to stake their own property on your success,” he said.
Of the one million shilling loan Olewe invested Sh600,000 on building a network of 130 sorghum outgrowers in Homabay, Sh150,000 on the construction of a 450,000 liter water pan and the rest to establish two acres of watermelons, onions and various vegetables, to hire labourers on his 24 acre sorghum and cassava seed multiplication farm. He also invested in building out his sorghum sourcing and supply network across the county.
“Before the loan, I supplied just two tons of sorghum to EABL with a pickup, for this season, we just delivered three and a half lorries of 35 tons of sorghum during the two-week supply window to the beer maker. I’ve also set up an acre of watermelons, three-quarter acres of various vegetables and a quarter acre of onions which I can grow during the off-season thanks to the water pan I was also able to construct with the cash,” he said.
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According to the Youth Fund, their agriculture loans are classed from Sh20,000 to 50,000 which has a nine month maximum repayment period, Sh50,001 to 200,000 with a maximum repayment period of 12 months, Sh200,001 to 500,000 with a max 18-month repayment period and a Sh500,001 to 1,000,000 with a max 24 months repayment window.
The farmer who began repaying the loan on August 20th last year advised anyone looking to take the loan to ensure they pay back on time, “For individual business loans, the bank has a standing order and automatically deducts the amount you are to pay every due day. Every time the transaction fails you are charged a Sh2,500 penalty and the interest on the loan automatically accrues,” Lucas said.
Youth Enterprise Development Fund:
Telephone: 020 2211672, +254 723 522841
Email: info@youthfund.go.ke