High interest rates, lack of collateral, fear of action on default are some barriers pulling farmers back from accessing credit despite the potential of loans in improving yields.

The September 2023 Agriculture Sector Survey by Central Bank of Kenya reported a slightly lower uptake of loans by farmers (48.5percent) compared to July 2023 survey.

The main lenders to the agriculture sector are commercial banks followed by friends and family, Saccos and digital lenders such as Mpesa, KCB Mpesa, Mshwari among others.

The Hustler Fund which was introduced in 2022 to provide cheaper credit to individuals and businesses at the bottom of the pyramid accounted for 10.3 percent and 7.5 percent in July and September respectively pointing to the great potential the Fund has to finance small scale farmers in meeting their operating costs such as payment of workers and purchase of inputs.

In terms of farm categorization, a higher proportion of large-scale farmers accessed loan facilities compared to medium and small-scale farmers, perhaps due to economies of scale and higher absorption capacity.

Large scale farmers accounted for 51.2 percent of the loans towards agriculture compared to 47.8 percent and 45.2 percent for medium and small-scale farmers respectively.

A majority (36.8 percent) of the farmers sampled in the September Survey used the borrowed funds to buy farm equipment and machinery up from 8.7 percent in July.

This could be rationalized by the need for machinery and equipment during the harvest season and land preparation for the new season. This was followed by use of credit to diversify agricultural activities, purchase of farm inputs and labour costs. Access to agriculture finance is however not without challenges.

“High interest rates was cited by 16 percent of the sampled farmers as the main barrier to agriculture finance. This was followed by 11.0 percent who voluntarily excluded themselves arguing that they did not need credit. Other barriers include; lack of collateral, fear of crop failure, fear of action on default among others.”

The September 2023 Agriculture Sector Survey aimed at obtaining indicative information on the recent trends in prices and output of key food commodities in select markets and farms to inform analysis of inflation developments and expectations.

SUBSIDISED FERTILIZER

It was conducted between September 11 and 15, 2023 after the long rains season and associated improved food supply amidst rising global and domestic energy prices. The results revealed a decline in the prices of key food items particularly maize and wheat flour following improved weather conditions. Additionally, the survey revealed an increase in the uptake of the government subsidized fertilizer which stood at 69 percent of the sampled farmers. That notwithstanding, high transport costs and input prices continued to negatively impact output and prices of key food items, while improved weather conditions supported increased production. Marketing/sale of farm produce was significantly impacted by price-related issues and competition from imports and local produce.

Despite the strong optimism largely associated with the expected bumper harvest in the next season, concerns regarding storage facilities of perishable crops such as potatoes abound. Most farmers are forced to do panic sales at throw away prices for fear of their produce going bad or the price collapsing due to flooding of the markets with goods from other local suppliers and imports.

“Interestingly, farmers appeared to adopt similar farming practices and timings which ends up disadvantaging them since the harvest often takes place at the same time.”