Kenya Pushes for Affordable, Long-Term Financing for Farmers — CS Mutahi Kagwe

 

Kenya has renewed its call for affordable, long-term agricultural financing, with Cabinet Secretary for Agriculture and Livestock Development, Sen. Mutahi Kagwe, urging financial institutions to shift from short-term, high-interest lending to sustainable, low-interest credit models that align with farmers’ production cycles.

Speaking during the 8th World Congress on Rural and Agricultural Financing, hosted by the African Rural and Agricultural Credit Association (AFRACA) in Nairobi, CS Kagwe said Kenya’s agriculture sector — which directly and indirectly contributes nearly 50% of the national GDP — requires financing solutions that reflect its seasonal nature and capital intensity.

“We must stop locking farmers into short-term, high-interest facilities and instead take a long-term view,” Kagwe said. “Let us lend at low interest rates, promote contract farming, and encourage participation in commodities and futures exchanges.”

Major Reforms in Agricultural Financing

CS Kagwe revealed that the government is merging the Agricultural Finance Corporation (AFC) with the Commodities Fund to improve efficiency, enhance capital access, and reduce duplication of roles. The move will also involve raising AFC’s core capital to make it more responsive to farmers’ financing needs.

He also proposed reinstating a policy that previously required financial institutions to allocate a mandatory percentage of their assets to agricultural lending — a policy he said had been abandoned, leaving the sector underfunded.

“Only 3% of total bank credit currently goes to agriculture. That is unacceptable,” Kagwe noted. “Reinstating this requirement will create an aggregated pool of funds to offer affordable, single-digit loans to farmers.”

Proposal for an Agricultural Fund

To ensure sustainability, Kagwe proposed the creation of an Agricultural Fund for AFC, modeled on existing exchequer-supported initiatives such as the Political Parties Fund (0.3% of revenue) and the Constituencies Development Fund (CDF) (2.5% of national revenue).

“It makes sense to support agriculture through a dedicated fund for AFC,” he said. “This will guarantee predictable, long-term capital for the sector that feeds our nation.”

Digital Transformation and Accountability

The CS further announced the establishment of a Projects Implementation Monitoring Unit (PIMU) to track agricultural investments and ensure accountability in public spending. He added that the ongoing rollout of the Kenya Integrated Agriculture Management Information System (KIAMIS) — already covering 7.1 million farmers — would enable digital financing, real-time data access, and farmer registration.

Representing Central Bank Governor Dr. Kamau Thugge, Deputy Governor reaffirmed CBK’s commitment to creating financial frameworks that enhance credit access and risk management in agriculture.

Global Call for Innovation in Agri-Finance

The Congress, themed “Innovating Finance for a Resilient and Inclusive Agri-Food System”, brought together policymakers, financiers, and development partners from Africa, Asia, Europe, and the Americas. Delegates emphasized the need for digital innovation, farmer-centered credit systems, and regional cooperation to strengthen food and nutrition security.

Kagwe’s proposals have sparked positive reactions among agricultural stakeholders, who view the reforms as a turning point in Kenya’s agri-finance landscape, potentially unlocking billions in affordable credit for smallholders and agribusinesses.

“This is the kind of bold thinking we need to make agriculture bankable and sustainable,” said one delegate.