Tell us your idea and we will fund it

With interest in agriculture rising, the question on the lips of many would-be farmers is how they can get funding for their start-ups. This is crucial for young people who do not have security for loans. Our Special Correspondent spoke to Agricultural Finance Corporation’s Managing Director Lucas Meso, who has a pleasant baggage of goodies for farmers, including those who do not have title deeds.

What opportunities are there in AFC for farmers?

We help farmers and anybody in that value chain. We are talking about agribusiness, agro-industry and marketing. The purpose of our finance is to enable farmers access credit in (an) affordable way because we give out our funds at 10 per cent interest per annum on a reducing balance.

This is the cheapest that you can ever get. I would say farmers have now realised the need to make money out of agricultural activities. They are now treating farming as a business. Most are repaying their loans because they are able to make money from farming. Nobody talks about write-offs anymore because the repayments rates have gone up.

For many years, farmers considered AFC funds free money. How have you been able to change this perception?

From time to time, the government used to recommend to Parliament selective waivers especially for farmers growing seasonal crops credits like maize and wheat, but not for development loans.

While this was done in good faith after a calamity like intense drought or floods, it created a wrong perception. But that has changed. You walk into AFC now knowing that the money you have taken, because it is a revolving fund, is meant to help another farmer, so you must pay it back.

How much does AFC disburse each financial year?

On average, we are able to disburse Sh5.5 billion because our loans are short-term.

What kind of financial packages do you have for farmers?

We have various products. In the seasonal crop growing areas like North Rift, and Narok, obviously you will have maize and wheat. But we have many loans. Our best performing loan currently is livestock.

We have financed horticulture, poultry is now big time and we are also financing bananas. We have also financed some maize millers and revived the cotton sector. We are dealing with ginneries in Nyanza, Eastern and Mt Kenya.

How can a farmer wishing to get finances go about engaging AFC?

We have 43 branches in 33 counties. So what they need to do is to locate our nearest branch and they will be able to get the loan requirements in whatever activity they want to engage in.

Can those farming on leased land access credit from AFC?

The AFC Act only recognised title deeds as collateral for the loans that we provide. But with the fragmentation of land, you will find that it is not realistic to stick to that model. So, we are currently experimenting with groups.

The groups will be able to guarantee members to access funds from us. This group lending model is meant to help young people and women because those are people who don’t have collateral.

What the Act had left AFC with were old farmers who have land. The average age of our farmers is 60 years. But we know and understand that the young people in the middle-class are those that drive the agricultural sector. We got to tailor-make products suitable for them.

What are the challenges you have faced so far in experimenting with this model?

If people came to AFC to borrow money honestly, there will be no need for collateral. But now, a group comes and immediately after the funds have been disbursed, it’s disbanded, making it hard to locate the members. Funds are available, even for young people at affordable rates.

They will be trained in areas which they want to venture in but let them come honestly. If they really want to engage in farming, then we have a solution for them. We require a group to have been in operation for at least three months. We have also funded young people on the basis of ideas they have pitched to us. We are also helping people build their credit history. We start them small and later they will not need collateral for our loans.

Talking of funding the youth on the strength of a business idea, how does one go about this?

If you want to do farming as a business, you have to sit down and identify activities you can engage in. Once you have done that, you should research on it. Once you are convinced, you can now come to us for funding.

What AFC requires is the comfort that you know what you are doing. If you come with that kind of proposal and we see that you can actually make money, we will give you a loan. The problem is that young farmers want to jump into things. But to succeed, they must have passion and they should be ready to sacrifice to make money in farming.

But with the vagaries of weather in many parts of the country, isn’t farming a risky endeavour?

Yes, there are weather challenges, but the bigger problem is the perception people have on crop or livestock insurance. Insurance is a solution to farmers relying on rain-fed agriculture. But also, its time people embrace small-scale irrigation.

It’s also pointless to rely on certain crops if grains are no longer viable. Farmers should try something else like traditional high-value crops which fetch more.

Is AFC overwhelmed by the number of farmers seeking funding?

We have some constraints. As a wholly government-owned institution, we rely on government for support. But the government has competing interests and we can’t expect to be given all the money we want. However, soon we will be looking for alternative funding channels. But I don’t want to talk about that now.

Why hasn’t AFC embraced technology?

Technology drives everything. We are looking at technology-driven products that will deliver our services at the doorstep of farmers. We want to see how farmers can apply for loans on their mobile phones. If we develop a smart card for example, they can be able to redeem the loans per activity, in compartments rather than take the money at once.

We are looking at having the input money redeemed at the fertiliser store. If they want to succeed in agriculture financing, they must have supervised funding because there is a lot of misuse of money. So we have to come up with a way that will ensure that they only access funds for a particular activity at a time.

Disbursement will be triggered by the activity they are undertaking. Still, I have to repeat, one must be honest.