In 2050 food production almost needs to have doubled to feed the future population of then 10 billion people. As agriculture forms the backbone of Kenya’s economy, contributing 50% to the country’s GDP and employing 70% of the labor force, it holds great potential to increase production levels. Investments in agriculture are critical to let the sector grow. Unfortunately only 5% of financial institution’s loan portfolio addresses the agricultural sector in Kenya. Increasing access to finance and markets for agricultural producer organizations is thus crucial for increasing food production in the country.
SCOPEinsight and Financial Access, two Dutch private companies, have initiated an innovative programme, Finance 4 Agriculture that addresses these challenges in Kenya. Loise Oburu, regional manager East Africa of SCOPEinsight, explains.
Let’s start with the specifics: What is the Finance 4 Agriculture program?
Finance 4 Agriculture is a Public-Private Partnership with the Dutch Embassy in Kenya and local partners. The objective of the F4A programme is to increase lending from financial institutions to agricultural organizations.
It is crucial to improve access to finance and markets. Currently only 5% of financial institutions’ loan portfolios are addressed to agriculture, while 70% of Kenya’s households depend on agriculture as the main source of their income. We believe the F4A programme can ensure an increase in agricultural finance and with that, improve agricultural production and employment levels in Kenya.
The F4A programme runs to September 2016 and consists of 12 innovative projects that address both the demand (=agricultural producer organizations) and supply (=financial institutions) side of agricultural finance. SCOPEinsight leads the projects on the demand side, while Financial Access manages the projects on the supply side.
So how does it work?
On the supply side, Financial Access increases financial institutions’ knowledge, expertise and skills to handle agricultural investments through individual training, joint workshops and seminars. With partners, products and tools such as credit scoring, insurance schemes and supply chain finance solutions are developed to stimulate the investments in agriculture. At the same time, a fund will be established for investing in producer organizations and agribusiness.
On the demand side, SCOPEinsight reduces the risks related to agricultural investments by professionalizing the agribusiness sector. By assessing producer organizations on their level of professionalism, pipelines are build that link the organizations financial institutions, capacity builders and other value chain players. At the same time, graduation programs support the assessed producer organizations to increase their level of professionalism and become more efficient in their daily operations.
Can you give an example of these projects within the programme?
For example, we found that the average level of professionalism of producer organizations in Kenya is currently very low, and we identified this as one of the major barriers for getting a loan from a bank. Through SCOPEinsight’s assessments the gaps in their organizations can be identified. Therefore one of the 12 projects of F4A is a basic graduation programme: helping the organizations to work on their weaknesses and graduate to a higher level of professionalism. The graduation programme itself is also very innovative: we often see that capacity building programs are focused on the technical side of farming and not on the business side. In our graduation program, a curriculum will be created that covers all aspects of running a farm – from production to external risk management, from internal management to financial management. This curriculum is being developed in cooperation with universities, who will provide the training through their agricultural colleges throughout Kenya. It enables all farmers in the country to access the trainings that they need.
Another one of the 12 projects is our Agri-Portal: an online platform where financial institutions can find the producer organizations that are ready for a loan. The online platform shows the assessment profile of the producer organization, together with the required documentation, facilitating a smoother and faster due diligence process at lower cost. Other value chain players such as capacity builders, input suppliers or processors can also enter the portal to identify producer organizations that they can do business with.
There are lots of development organizations and programmes focusing on agriculture, what makes this programme different?
The difference in our approach is, as the slogan of the F4A programme indicates: ‘Farming means business’. We think the solution lies in seeing farming as a business. In order to increase agricultural finance, financial institutions, traders and other market players must recognize the business opportunities in agriculture. If farming has to be done as a business, it is crucial to work with partners in the private sector who can support the producer organizations to increase their production levels, providing support from professionals or provide insurance. A public-private partnership is a great opportunity to enable such collaboration.
The F4A program runs until September 2016. If you want more information or if you are interested to partner with us in the program, please contact us via in**@sc**********.com.
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