Frmers during a past agricultural event. Small-scale farmers can now access loans with an interest rate of 1.2 per cent to help them boost their production.
Solution Sacco Limited, a savings and credit sacco is offering up to Sh20,000 loan to groups of smallholder farmers who lack financial might to start up or advance in agribusiness and repay the loan at 20 per cent interest rate enabling the farmers to boost their production to cope up with the rising demand of crop produce.
Lack of finance has been attributed as the main cause limiting small-scale farmers to venture in agribusiness, according to a report released by the Alliance for a Green Revolution in Africa (AGRA) in September 2016.
The report further indicated that the gap for entrepreneurs in need of funding is between $1.25 million (Sh125 million) dollars and $1.50 million (Sh150 million) dollars to take their agribusiness to the next level of growth. This is the gap Solution Sacco Limited among other financial institutions is seeking to bridge with farmers within its reach.
“We as a sacco recognise that the lack of finance has seen many farmers opting for agribusinesses stagnate making it difficult for the country to realise its true agribusiness potential,” said Samuel Kainga, agronomist at Solution Sacco Limited.
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The sacco was convinced about the farmers’ need for financial support after a successful pilot programme which involved about eight farmer groups within Tharaka Nithi County which ended last year February.
“We tested the workability of this financing system last year on sorghum farmers who in total had about 14 acres and it was 80 per cent successful giving us the confidence to roll it out in other counties and regions,” said Kainga.
To access the loan, a farmer need to be in a group of about 5-10 farmers as most smallholder farmers just own small pieces of land. The sacco’s officials visit the farmers’ premises where they calculate the budget for farm inputs, labour and transport.
Once everything is done, a loan agreement between the sacco and the farmers is signed where the farmers are required to contributed 20 percent of the total production cost while the sacco provide the remaining 80 per cent.
“We carry the bigger percentage of the whole production cost because we believe in the support to the farmers. However, in any case the farmers would want to take more than 20 per cent, we still allow that under our loan agreements,” said Kainga.
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The first month upon the disbarment of the loan is the grace period then the following month farmers are supposed to start repaying the loan at Sh240 per acre per month though the repayment can be less or more the amount depending on the total loan offered.
In addition to financial support, the sacco also offer services such as insurance in case of crop failure, extension services and market services.
We do not leave our farmers until we ensure they sell their produce, said Kainga, this is by linking them with the buyers who after buying pay through our sacco accounts then we release the money to the farmers.
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The sacco is currently in need of as many farmers as possible targeting Meru, Tharaka Nithi, Isiolo, Kitui and Narok counties for the start as it aims to expand countrywide.