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As KCB, we will tough it out to grow farmers

13th Jul, 2017

Agribusiness is tough business. The moving parts are so many and varied such as small-sized, uneconomical farms with limited mechanization and capacity, leading to poor yields, fragmented markets, larger-than-life middlemen, price controls and fluctuations, to poor infrastructure, all of which eat into profits.

Add to it the current weather patterns that deviate from the traditional path thanks to climate change and agribusiness becomes that much tougher. Then there’s the low uptake of agricultural insurance products and the cocktail makes it that much harder for a banker looking to finance it.

But KCB Bank, says the Group CEO and MD, Joshua Oigara, is looking to tough it out and seize the enormous opportunity that exists in the agriculture sector, which, according to Kenya Government statistics, employs 70 per cent of the population, accounts for 65 per cent of Kenya’s total exports and provides more than 18 per cent of formal employment.

“We are making a deliberate decision to play in the agricultural sector as it is an area that seems to have been neglected by most financial institutions for a long time with only three to four percent of the loans in the banking sector channeled into agribusiness,” Oigara told Venture.

The KCB Group, has committed to spend at least Ksh35 billion (US$ 350 million) in the next five years in new lending to the agriculture sector in East Africa to deepen financial inclusion among smallholder farmers.

The bank’s outlook is that this contribution will provide critical funding for more small-holder farmers, a majority of whom are left out of the credit conversation.

“This is our commitment towards supporting farmers to rise to the centre of driving East Africa’s economic agenda into the future,” said Oigara. “Agriculture sits at the centre of our business. We are reimagining and redefining the agriculture sector with a view of transforming agribusiness by accelerating financial services access.”

Oigara said the increased funding will constitute five percent of the bank’s loan book. Currently, the bank lends almost Ksh14 billion to the agriculture sector.

“We have seen the impact that even a small intervention can make for those who did not have access to funding in the past. The multiplier effect in the sector is enormous. ,” said Oigara.

“It is unfortunate that less than one billion dollars of the banks’ lending books goes to the agriculture sector in Africa,” he added.

KCB Group has in the recent past intensified its intervention in the agriculture sector, with a number of initiatives targeting a sector that has traditionally not attracted much attention.

Currently, KCB Group is in the process of extending at least US$200 million (Ksh20 billion) to farmers in Kenya and Rwanda in affordable loans over the next five years through a programme dubbed KCB MobiGrow.

KCB MobiGrow includes provision of a mobile phone-based technology solution that will enable small-scale farmers to access financial services such as credit, insurance and savings through their mobile phones through the Bank’s Mkulima and Mifugo ni Mali projects. KCB Group is also in a USD30 million (Ksh3 billion) partnership with MasterCard Foundation for funding small holder farmers in Kenya and Rwanda over the next five years targeting two million farmers. Both KCB Group and MCF have set aside an investment of US$15M (Ksh1.5 billion) into this partnership.

The programme aims to reach farmers, 60percent of whom are women, in the dairy, livestock and food subsectors in the two countries.

The US$30 million will be spent on mobilizing and training of smallholder and pastoralist farmers on financial literacy and business management to improve on production and stock management, extending mobile financial services to smallholder farmers, research and facilitating cross learning between producer organizations. Farmers will also be exposed to market opportunities for their produce under the project.

 

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