Farmers in Kenya primarily access credit through banks, Savings and Credit Cooperative Societies (SACCOs), informal lenders like friends and family, digital loans and the government’s Hustler Fund. These funds are used to finance farm equipment, agricultural inputs like seeds, fertilizer, and pesticides, as well as labour costs.
Credit is important to Kenyan farmers as the high cost of inputs especially when it comes to fertilizer, seeds, and pesticide present a huge challenge. The government of Kenya (GoK) has tried to mitigate this factor in several ways. In 2022, the government initiated the Hustler Fund to help credit-constrained households access credit on favourable terms.
According to a Central Bank of Kenya (CBK) survey of the November 2023, the Hustler Fund enabled up to 10 percent of farmers surveyed to get credit. The credit enabled farmers access funds to purchase farm inputs and pay for labour.
Bank Loans and Digital Loans Popular Among Farmers
Based on a new CBK survey, farmers took out more loans in March 2024 compared to January 2024. This makes sense because farmers typically need money in March to get their farms ready for planting during the long rains season. The season runs from March to May in Kenya.
From the formal sector, farmers majorly relied on loans from banks and digital credit platforms. The proportion of farmers who rely on digital loans e.g. M-Pesa, KCB, M-Pesa, Fuliza etc has grown by 24% reaching 31% of surveyed farmers in the last 3 months. This is no surprise as credit is the number one adjacent financial service offered by mobile money platforms.
About 32% of farmers relied on bank loans in January and this figure grew to 41% in March. In total, only 6 % of farmers surveyed relied on Hustler Fund credit facility. This shows the facility is not that popular among farmers. A previous survey found the facility is not sufficient enough to fulfill commercial needs. SACCOs are also important lenders although the proportion of farmers borrowing from them decreased.
Despite needing financial resources, many farmers hesitate to take out loans. The main reason for this is high interest rates. Additionally, some farmers fear losing assets through auction if they’re unable to repay the loan. Moreover, the uncertainty of rainfall led many farmers to avoid loans, fearing they wouldn’t be able to repay them if their crops failed.
Farmers using irrigation were hesitant to take loans due to unpredictable swings in crop prices, making their income unreliable even with a good harvest. Additionally, some irrigation farmers, particularly those leasing land, mentioned a lack of collateral as a barrier to securing loans.
