The Ministry of Agriculture has revealed that it is in the process of merging two agricultural financial institutions, the Agricultural Finance Corporation (AFC) and the Commodities Fund, in a move that could spell doom for some workers at the two institutions.
The AFC is a government-owned development finance institution that provides loans as well as other financial services to the country's agricultural sector.
On the other hand, the Commodities Fund is also a government agency that provides affordable credit to the crops sector and also invests in raw materials like energy, metals, and agricultural products.
Agriculture Cabinet Secretary Mutahi Kagwe said that merging the two will be fundamental in improving efficiency and meeting farmers' financial needs.
Kagwe revealed this on Wednesday, October 28, during the 8th World Congress on Rural and Agricultural Financing hosted by AFRACA in Mombasa.
“We should stop locking farmers into short-term, high-interest facilities and instead take a long-term view. Lend at low interest rates and encourage farmers to adopt modern methods by embracing technology. Push contract farming, sign futures contracts, and promote participation in commodities and futures exchanges,” said Kagwe.
“It therefore makes sense to support the agricultural sector by setting up a similar fund for the Agricultural Finance Corporation,” he added.
Additionally, the agriculture boss emphasised the need to reinstate an earlier policy that required financial institutions to lend a mandatory percentage of their assets to the agricultural sector.
“We somehow abandoned this requirement along the way. This aggregated pool of funds will go a long way in providing sufficient, easily accessible capital at single-digit interest rates. It should be reinstated,” Kagwe said.
The CS also announced that the ministry is also in the process of implementing a Projects Implementation Monitoring Unit (PIMU) to effectively monitor investment in the agricultural sector.
Kagwe further assured that the ministry will reinforce efforts to see the effective rollout of digital financing and farmer registration systems under the Kenya Integrated Agriculture Management Information System (KIAMIS), which is already covering 7.1 million farmers.
"There needs to be a paradigm shift in agricultural financing, urging financial institutions to move away from short-term, high-interest lending and adopt long-term, low-interest facilities tailored to farmers’ realities," he said.
