Hurdles of Kenyan farmers, organisations as well as small and medium sized enterprises in the agriculture value chain in accessing credit are set to ease with the signing of a €13 million ($13.8 million) financing agreement between German lender KfW and the East African Development Bank .
The lender will provide medium to long term loans.
The agreement targets the "Agricultural Financing Kenya" project which is funded by the German government as part of the wider "One World No Hunger" special initiative.
EADB will be the project implementing agency providing lines of credit to intermediary banks, Oliver Junger, the director KfW Kampala office said.
Mr Junger, who signed the deal on behalf of KfW said that despite agriculture constituting 30 per cent of Kenya’s GDP and employing over 60 per cent of the population, SMEs in the sector suffer the same challenges of access to financing as other agribusiness firms in in many African countries.
The regional development bank’s director general Vivienne Yeda said that the loans which will range from $14,000 to $55,800, can be drawn in local currency and interest will be charged “slightly below the current market rates” in Kenya.
Explaining why the lending threshold was set to about $13,800 Ms Yeda said the bank’s “intention is to have as large a beneficiary pool as possible,” based on lessons from two similar programmes that are being implemented in Uganda, also financed by KfW.
In 2015, EADB and KfW started collaborating on the "Rural Finance Enhancement Programme" and the "Agricultural Enhancement Programme" in Uganda. The programmes are still ongoing.
More than €20 million ($21.2 million) has been extended to SMEs in rural areas and along the agricultural value chain in Uganda, to buy machinery, pay suppliers and staff.
“All these businesses supplying hotels, schools and those in production of sorghum [to supply beverage companies] need external funding,” Ms Yeda said during the signing that took place on April 13 at the EADB in Kampala, Uganda. “It is our belief that the programme will give agricultural SMEs in Kenya the opportunity to invest and therefore expand and grow."
The Kenya project consists of two components, the first of which will provide medium to long term loans amounting to €12 million to small and medium sized farmers and SMEs along the agriculture value chain. This will be done via selected partner financial institutions that boast extensive market knowledge, while the second component of about €1 million will be technical assistance and will involve training and capacity building measures.