Wednesday, May 7, 2008

Equity unveils Sh3bn loan scheme for farmers


Written by Steve Mbogo
Equity Bank building
May 7, 2008:
At least 2.5 million small- scale farmers across the country will benefit from Equity Bank’s low interest rate loans, at a time when most are trying to increase yields to take advantage of the rising food prices in the global market.

The loans are being seen as a short term measure to help the country regain food security after three million bags of maize — a third of the national grain strategic reserves — were destroyed in post-election violence early this year.

The money will be distributed immediately and will be guaranteed with Sh325 million from the Alliance for the Green Revolution in Africa (Agra) and the International Fund for Agriculture (Ifad). The security is meant to cushion Equity Bank against defaults or natural calamities.

Agra, which is funded by the Bill and Melinda Gates Foundation and Rockefeller Foundation, has already committed billions of shillings through its partners to improve small holder agriculture in Africa.

The money will also be loaned to small agricultural activities, especially rural-based endeavours that give farm inputs and extension services to farmers and will also benefit fertiliser, seed wholesalers, grain importers and food processors.

The loans, which are aimed at helping farmers boost their harvests through making it affordable for them to buy fertilisers and other inputs, will attract a 10 per cent interest rate, below the current bank average of 15 per cent.

The new money will help reduce the credit requirements of the agriculture sector estimated to be Sh60 billion, according to President Kibaki.

By end of last year, a total of 25,000 farmers had been given loans totalling over Sh3 billion under the seasonal credit loans scheme, while a further Sh2 billion was disbursed under the enterprise loans scheme.

“To boost these efforts and to ensure that key crops have a sustainable source of development credit, we will increase the Sugar Development Fund from the current Sh3.2 billion to Sh4 billion, and the Coffee Development Fund from the current Sh750 million to Sh2 billion in the next two years,” said the President when he launched the scheme in Nairobi yesterday.

Equity Bank chief executive officer, Dr James Mwangi, said he expected the loan to transform lives through agriculture, explaining farmers would be able to produce and export more yield to take advantage of the high commodity prices.

“China and the rest of Asia have capped their grain exports. This is an opportunity for Kenyan farmers to produce more to take advantage of the high grain demand.”

The scheme by Equity Bank marks its commitment to the agriculture sector, the first time in Kenya’s history that a publicly-owned bank is investing aggressively in farming.

The bank last month entered into a deal with the Eastern Africa Grain Council to pioneer a system known as warehousing receipts that enables the farmer to get cash advance against maize stored under the facility.

The system, operating as a post-harvest technology, is meant to ensure that farmers are not affected by the price fluctuations of grains and eliminates the need for the middlemen.

Over the years, partly due to the inability of the National Cereals and Produce Board (NCPB) — buyer of the last resort — to pay farmers promptly, the latter have opted for the middlemen offering lower prices for the produce.

Dr Mwangi said the bank is also in discussion with the NCPB, the State-run grain handler, to develop a system where farmers will get cash advance against delivery.

In February, Agra partnered with the Tanzania National Microfinance Bank (NMB) to launch a Sh396 million farm input credit scheme to benefit poor farmers and to improve the country’s network of rural agro-dealers.

NMB committed Sh325 million to lend to farmers while Agra and the Financial Sector Deepening Trust provided Sh71 million in a guarantee fund.

Proponents of the warehouse receipt system say that leaving grain handling and storage in the hands of professionals would produce better results and give farmers room to start preparing land early for the next planting season.

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