LUXEMBOURG CITY, LUXEMBOURG — Kenya’s agriculture sector is getting a huge boost in the form of a new €50 million agriculture financing program, the Kenya Agriculture Value Chain Facility, launched by the European Investment Bank (EIB) and supported by the E.U.
The new initiative represents the first dedicated support for long-term investment by agriculture companies in Africa backed by the EIB, the world’s largest international public bank. The scheme is designed to tackle specific investment gaps currently hindering expansion in the sector.
“Working with Equity Bank across the country the new Kenya Agriculture Value Chain Facility will help agriculture companies to modernize and harness the full economic, employment and export potential of agriculture as well as expand business with local smallholders,” said Catherine Collin, EIB regional representative for East Africa. “As the E.U. Bank, the EIB is pleased to strengthen our close cooperation with Kenyan partners and the European Union Delegation to ensure that agricultural investment can increase under an exciting new scheme that acts as a model for our engagement across Africa.”
Equity Bank is the first Kenyan partner to participate in the Kenya Agriculture Value Chain Facility and other financial institutions are expected to join later. Equity Bank is one of the key financial institutions supporting the agricultural sector in Kenya and is a leading provider of financial services to rural communities and smallholders.
“The Kenya National Government’s Big 4 Agenda includes Manufacturing and Food Security (Agribusiness),” said Polycarp Igathe, Equity Bank Kenya managing director. “Equity Bank has aligned its strategy with this national agenda, to focus on growing the Agribusiness portfolio through servicing all segments from retail, to SME to large enterprises and corporate banking customers.”
Equity Bank has identified the potential for growth, by adding medium size and large commercial farmers to the Agriculture portfolio as well as focusing on financing of the Agri-Food processing companies.
“This credit facility will be used for on-lending of up to 50% of project costs to beneficiaries who are eligible,” Igathe said. “The enterprises we are targeting include Value Chain SMEs in agribusinesses that are supporting a smallholder farmer base.”
The new agriculture financing initiative will address the gap of long-term funding in the sector identified as a key barrier to growth.
Agriculture is the leading source of economic activity, employment and exports in Kenya. Agriculture contributes directly and indirectly to 51% of Kenyan GDP and accounts for 60% of jobs in the country.
Under the new financing program agricultural companies across Kenya will be able to access Kenya Shilling loans with maturities of up to seven years, longer than commonly available in the market. This is expected to help companies to expand, upgrade and modernize their equipment thereby improving productivity, and strengthening integration of smallholders into the agricultural value chain.
The new initiative is designed to increase investment activity by agricultural companies and by making available funding in Kenya Shillings will mitigate against exposure to foreign exchange risks that currently hinder agriculture investment.