Farmer loan uptake dips in September, says Central Bank of Kenya

The Agriculture Sector Survey of September 2023, conducted by the Central Bank of Kenya, indicates a modest decline in loan uptake by farmers. The figure stands at 48.5%, marking a drop from the July 2023 survey.

Prominent financiers for the agricultural industry include commercial banks. However, other lending sources include friends and family, Saccos, and digital lenders such as Mpesa, KCB Mpesa, and Mshwari.

Introduced in 2022, the Hustler Fund, which caters to those at the bottom economic tier, accounted for 10.3% of loans in July, dwindling to 7.5% in September. This suggests the fund’s potential in financing small-scale farmers for operational costs, including labor wages and input acquisitions.

A deeper analysis of the data reveals that large-scale farmers tend to have more access to loan facilities than their medium and small-scale counterparts. Specifically, 51.2% of the loans for agriculture were acquired by large-scale farmers, while medium and small-scale farmers took up 47.8% and 45.2% respectively.

Of the farmers surveyed in September, 36.8% utilized the loans for the purchase of farm machinery and equipment. This marks a considerable increase from 8.7% in July. The trend might be attributed to the harvest season and preparations for the subsequent farming season. Following this, loans were commonly used to diversify agricultural pursuits, buy farming inputs, and cover labor costs. Nonetheless, acquiring agricultural finance remains challenging.

The study highlights high-interest rates as a significant impediment, with 16% of the surveyed farmers identifying it as a primary obstacle. Additionally, 11% opted out of borrowing, believing they didn’t require credit. Other hindrances identified were the lack of collateral, potential crop failure, and apprehensions about default consequences.

The main objective of the September 2023 survey was to gather data on recent pricing trends for staple food items across selected markets. This would serve to inform inflation analyses and forecasts.

The survey, executed between September 11 and 15, 2023, showcased a drop in prices of essential food products, notably maize and wheat flour. This positive trend was a result of favorable weather conditions. The research also noted a rise in the uptake of government-subsidized fertilizer, with 69% of surveyed farmers utilizing it. However, increased transportation and input costs remain a challenge, negatively affecting food product outputs and prices. An added concern is the competition faced by local produce due to imports.

Farmers remain hopeful about the anticipated abundant harvest next season. Yet, issues concerning the storage of perishable items such as potatoes persist. Many farmers resort to hasty sales at reduced prices, fearing the degradation of their produce or potential market oversaturation.

A noteworthy observation from the survey is that farmers often embrace similar agricultural schedules, which ultimately works to their detriment as simultaneous harvests can flood the market.