What type of loans do you offer to farmers, at what interest rates and their repayment period?
We offer all agricultural loans especially for the young generation at 10 per cent interest with a repayment period of seven years. We have a seasonal crop credit, which are one year loans payable at year end at same rate and livestock keeping for 24 months to five years. There are also water development, sugar, machinery, agribusiness, school loans among others. Sugar loans we give at 5 per cent thanks to collaboration between the defunct Kenya Sugar Board and AFC.
What does one need to qualify for a loan from AFC?
Anybody who is a farmer and has a heart for agriculture is eligible to access credit. Since it is a project financing, we expect the applicant to have a good plan that addresses all the issues from production to the market.
We want to know how you will make money in the farming enterprises you are engaging in. The second requirement is that the land you want to farm should have a title deed to act as collateral. We also want to know the projected cash flow from the farming enterprise you are undertaking.
Have you had loan defaulters and what is the current and recovery rate?
Yes, we have faced such. Our farmers are sometimes affected by the unforeseeable circumstances like crop failure, unfavourable weather patterns among others thus affecting their repayment rates. But we are now discouraging loan write offs and are looking at others ways like refinancing and restructuring to take long repayment period but not default.
We do not have a figure on loan defaulter but we now have a recovery late of 90 to 95 per cent. For those facing challenges paying back the loans, we encourage them to come and have a discussion on a repayment plan.
Our loans are more affordable and AFC operates a revolving model whereby, when we give you loan, you repay and we give someone else.
How has been the loan uptake and what is the current loan portfolio?
The loan uptake has been on the increase and currently we are in the region of Sh8 billion and hope to increase this to Sh15 billion to Sh16 billion in the next two years.
We hope to achieve this by changing our business model and embracing wholesale financing, using anchor client models as a way of reaching many farmers downstream.
In anchor model, we have one big client like a sacco, who is able to support many more small scale farmers who lack collateral and therefore cannot benefit directly from AFC due to the small loans that they desire. Our direct loans start from Sh200,000 upwards.
The model has been revolutionary. We are now seeing a decrease in bad loans and huge impact down there.
Is it true that youths are not joining farming and what special products do you have for them and women?
It’s true but what we need is to modernise our farming as opposed to traditional way to make it attractive to them. For the young people, there is an upcoming programme that is now being finalised in collaboration with African Development Bank(AfDB).
Part of our AFC Transformation journey is that we have critically analysed our products lines by gender. We have also found out that women farmers are good at repaying.
We are trying to address women needs through Women Affirmative Access Window, targeting the women and will address issues like collateral because we understand women have challenges in owning land.
Is there need for policy change that could be hindering you from carrying out your mandate effectively?
Yes, we have legislative challenges. For instance, in our current form, we are only known for credit services and because of that we have not been able to mobilise serious resources without Government support.
We are addressing the legal reforms so that it can be opened up and interact with multilateral lenders so that we have more money to lend to our farmers. We also hope to make AFC a proper development bank that is self-sustaining. A special taskforce has been formed to help in that legal reforms.
Word has it that small scale farmers have been sidelined by AFC leading them to be milked dry by Small and Medium Enterprise banks. What’s your take?
AFC has loans for every farmer whether small or large. To reach the smallest farmers, we are now deliberately targeting rural cooperatives or microfinance institutions(MFIs) that deal in agriculture and very soon you will see all those small scale farmers get loans through such cooperatives or MFIs. We now have 47 branch offices in 47 counties.
When the country is discussing agriculture these days, much emphasis has been given to institutions like National Irrigation Board and National Cereals and Produce Board(NCPB), do you think these institutions have eaten into relevance of AFC?
Not at all. The three institutions are distinctive with different mandates and the way they were formed was to supposed to collaborate.
NCPB and NIB do not do agriculture financing.
This article first appeared in the Farmers.co.ke