The agricultural sector is the least funded sector in Kenya despite being the largest in terms of GDP contribution (at over 50% GDP contribution, directly and indirectly,). With an estimated 8.5 million people in Kenya engaged in some form of agriculture, the choice of capital to finance agricultural activities has been solely left to credit institutions, thus limiting a farmer’s choices, forcing him to put up with the sale of assets, alternative incomes and social networks. Inadequacy of financing tools in aspects such as inputs, working capital, and mechanization leads to inefficiency in the value chain and thus resulting into chronic food shortages.
Take the example of maize farming in Kenya. This is mainly done by small-scale farmers across the nation without any profound distinction, a second example is a livestock in the Northern parts of the country. Sales occur through local markets with only a small percentage going through cooperatives. Financing agriculture subsectors would cause a boost in the reorganization of the agricultural field, with quality and quantity yields being a bargaining chip for higher sales and more money for farmers.
Kenya is ripe for fresh modeling of agricultural financing to incentivize both financiers and farmers to take on investment risks. For starters, there’s a need to establish a framework to assist vulnerable and rural smallholder farmers to reduce risk and increase investment in their farms. Through strong partnerships and innovative insurance products, farmers can manage controllable risks and are supported through insurance when disaster strikes. There’s a need for a stronger public sector presence in the agricultural sector through rural finance in avenues such as agribusiness and providing utilities while also offering loans and related services at competitive prices to farmers.
Farmers will adopt diverse agricultural practices, stagger planting over time, plant resilient crops, and have multiple sources of income to mitigate the risks associated with losses to their livelihoods. While these methods may offer some sort of resilience, factors such as climate change, natural disasters, and pest infestations can leave farmers with no hope for financial recovery, driving them deeper into poverty.
With the agricultural sector being among the first to be devolved to county governments, food security has once again been put at the forefront of the nation’s agenda. Agriculture would be an important sector in the alleviation of poverty therefore stringent measures on financing the sector would go a long way in achieving recovery and growth in Kenya after recent years of drought and slow development.
The writer is a final year commerce student at Kenyatta University | firstname.lastname@example.org