Smallholder agribusinesses in the region could gain easier access to credit after the European Union (EU) offered Ksh5.7 billion (€50 million) for a financing scheme through a facility known as Kenya Agriculture Value Chain Facility.
The facility launched by the European Investment Bank in Nairobi means agricultural companies in Africa could get funding to deal with “specific investment gaps” that have forced most investors in the sector to either go slow or quit altogether.
Catherine Collin, the European Investment Bank regional representative for East Africa, said the programme will involve local lender Equity Bank to implement the Kenya Agriculture Value Chain Facility to help firms in agriculture expand their business while adopting latest technology.
Equity Bank Kenya Managing Director Polycarp Igathe said the lender is aligning its strategy with the national agenda and will be focusing on growing the agribusiness from retail, to large enterprises. As part of the national agenda, the government recently identified food security.
“Under the new financing programme agricultural companies across Kenya will be able to access loans with maturities of up to 7 years, longer than commonly available in the market,” he said in a statement.
“This move is expected to help companies to expand, upgrade and modernise their equipment thereby improving productivity, and strengthening integration of smallholders into the agricultural value chain.” The money will be provided in Kenya shillings in what officials said will shield local investors from forex fluctuations.
Walter Tretton, Chargé d'Affaires of the European Union Delegation to Kenya, said the programme is the first in which the EU is directly funding the private sector in agriculture.
“There is a great deal of expectation on this new approach. The EU chose it in Kenya because we recognise that smallholder farmers do not need handouts: they need an enabling environment to be successful market operators. This requires access to finance and reducing the risk of investing in a difficult environment," he explained.
The Kenyan scheme is part of the European Investment Bank’s ongoing support to strengthen private sector investment and entrepreneurship across Africa through new financing and technical assistance aimed at institutional strengthening.