State mulls financing model for agriculture
By Nicholas Waitathu, March 28, 2025The government is set to launch a policy on agricultural financing aimed at improving access to credit for farmers and boosting production.
The policy, expected in the next two months, seeks to address the risks that discourage financial institutions from extending credit to the sector.
Agriculture Principal Secretary Kipronoh Ronoh said the government, in collaboration with industry stakeholders, has drafted the policy and is finalizing consultations before its release in May.
He emphasized that the initiative is intended to eliminate barriers that hinder financing for farmers. “The policy has analysed all the risks that discourage commercial banks and financial intermediaries from increasing credit to farmers. Our goal is to create a more conducive lending environment.”
Speaking at the launch of the Financing Agri-Food Systems Sustainably (FINAS) 2025 Summit in Nairobi, Ronoh said that inadequate financing has led to low agricultural productivity, limiting farmers’ ability to earn competitive returns in local and regional markets. The policy will eventually be transformed into an Act of Parliament to provide a long-term solution.
Supporting value chain
In the 2025/26 fiscal year, the agriculture sector has been allocated Sh77.7 billion, up from Sh73.9 billion in the previous year, representing 3 per cent of the ministerial budget. Ronoh noted that these funds will strengthen the agricultural value chain, improve food security, and create jobs.
Freddy Bob-Jones, Managing Director at Aceli Africa, noted that despite its significance, the agricultural sector faces persistent financing challenges due to high lending risks and costs. He pointed out that while a 10-year government bond yields about 14 percent, the average return on agricultural loans for commercial banks is only around 3 percent.
Aceli Africa provides concessional financing to encourage lending to agricultural small and medium enterprises in Sub-Saharan Africa, yet the sector receives only 4 to 5 percent of commercial bank capital.
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