Low financial literacy holding back more funding to farmers, says top bank official

Many farmers remain ineligible for financing due to a lack of consistent transactions through bank accounts, denying lenders the financial data needed to assess creditworthiness. [iStockphoto]

Kenya’s push for food security and agricultural mechanisation continues to face a major hurdle, limited access to affordable financing for farmers, driven largely by low financial literacy and weak banking records.

Speaking during the signing of a financing partnership between Inchcape Kenya and NCBA, Group Director for Asset Finance Lennnox Mugambi said the biggest gap locking farmers out of credit is not lack of funding, but lack of consumer education.

Mugambi said many farmers remain ineligible for financing due to a lack of consistent transactions through bank accounts, denying lenders the financial data needed to assess creditworthiness.

“We need to educate farmers to transact through their bank accounts so that financial institutions can assess them properly. That is the real gap between consumer education on how to manage finances and build a track record that makes them eligible for financing solutions,” he said.

Agricultural equipment

He noted that traditionally, banks have struggled to support farmers’ equipment needs, particularly tractors and farm machinery, despite agriculture being central to Kenya’s economy.

According to industry data, Kenya imports about 78,000 motor vehicles annually, most of them supported by structured financing options.

In contrast, the country imports only about 7,800 tractors per year, highlighting a long-standing imbalance in access to credit for agricultural equipment.

“This shows that we have not effectively supported tractor ownership the way we have supported commercial and personal vehicles,” Mugambi said. “Yet mechanisation is critical if we are serious about food security.”

Through the new partnership, Inchcape and NCBA aim to catalyse tractor ownership and close this financing gap by offering tailored credit solutions aligned to farmers’ cash-flow cycles.

NCBA will finance up to 95 per cent of the tractor cost, including up to two farm implements, with repayment periods of up to 60 months longer than the traditional 48-month lending window common in the market.

NCBA executives said the approach recognises the cyclical nature of farming incomes, which has previously made many farmers appear high-risk under conventional lending models.

“This partnership was designed around seasonality,” said Inchcape CEO Marion Mwangi. “Farmers need time to prepare land, plant, harvest and generate income before repayments begin.”

The initiative is anchored on New Holland tractors, which Inchcape says are built for African conditions, offering fuel efficiency, durability and compatibility with a wide range of implements including ploughs, harrows, sprayers and balers.

Beyond financing, Inchcape has expanded its national footprint with service centres in Nairobi, Kisumu and Nakuru, with plans to roll out to Mombasa, Meru, Nyeri and other regions, supported by mobile service vans to reduce downtime for farmers.

Agriculture contributes about 21 per cent of Kenya’s gross domestic product (GDP), accounts for nearly 40 per cent of total employment, and supports 69 per cent of rural livelihoods.

However, mechanisation levels remain low, with motorised power accounting for only about 30 per cent of farm operations, compared to heavy reliance on manual and animal labour.

Industry players say boosting access to modern machinery is no longer optional, especially as climate change disrupts rainfall patterns and shortens planting windows.

“We believe that with the right financing, Kenya can significantly increase tractor ownership and productivity,” Mugambi said. “If we get this right, we enhance food security, improve farmer incomes and strengthen agriculture’s contribution to the economy.”