Kenya School of Monetary Studies patners with NGO to develop cheap loans for farmers

A US-funded NGO has partnered with the Kenya School of Monetary Studies (KSMS) to develop affordable loan products for farmers.

The Nairobi-based Global Communities, which is supported by United States Department of Agriculture (USDA), said the partnership is aimed at enhancing the capacity of local banks, especially those in rural areas, to develop more facilities specific to farmers.

“The banking sector lends a much smaller share of their loan portfolios to agriculture, compared to agriculture’s share of the gross domestic product,” Global Communities said in a statement to Business Beat.

The statement added that most banks have tended to ignore the agricultural sector due to its associated risks, which are mostly driven by limited understanding of the dynamics of the sector. KSMS’ partnership with local banks is aimed at helping financial institutions see agribusiness as a viable sector, and through custom-made products, harness the opportunities in the sector.

Agriculture financing

Through the collaboration, KSMS and Global Communities are conducting trainings on agriculture finance for bank employees to increase their capacity to develop relevant and affordable credit products for farmers.

“Most banks don’t have dedicated agriculture departments and staff,” said Global Communities.

To address this, “KSMS with Global Communities’ USDA-funded Agribusiness Investment for Market Stimulation programme and Financial Access have developed a practical course on agriculture finance – the Executive Certificate in Agricultural Finance (ECAF) – for banking staff”.

The programme targets loan officers, credit analysts, sector heads and other loan-underwriting staff. The programme has also been rolled out in Tanzania and Malawi.

Phares Ochola, the academic co-ordinator at KSMS, termed ECAF an opportunity for banks to meet the needs of the agribusiness sector.

“Banks that have been trained under ECAF are beginning to tailor their products to better meet these needs and expand their lending to the sector,” he said.

“The positive interest in ECAF shows that it is changing the attitudes of banks and their employees on agriculture lending.”