Streamlining financing agriculture sustainably in Kenya

Agriculture, being the largest sector contributing to Kenya's gross domestic product (GDP), continues to face a significant challenge when it comes to accessing loans and investments. Despite its vital role in economic growth and as a major employer in the country, the agriculture and agribusiness sector struggles to attract adequate funding. CNBC Africa had the opportunity to speak with Benjamin Njenga, Managing Director of Apollo Agriculture, to discuss how the funding gap in the agricultural sector can be addressed through blended financing models. Njenga highlighted the importance of sustainable financing models to propel the sector forward. As agriculture remains a cornerstone of economic development and food security not only in Kenya but across Africa, innovative solutions are needed to enhance productivity, sustainability, and financial access for smallholder farmers. One of the key themes that emerged from the interview was the increasing focus on technology and innovation in agriculture. Njenga pointed out that advancements such as the use of satellite technology, mobile money, blockchain, and artificial intelligence are helping to address key challenges faced by farmers, including access to finance, weather forecasting, and market information. These technological solutions are crucial in closing the productivity gap between smallholder farmers in Africa and their counterparts in developed countries. By leveraging technology, farmers can enhance their production efficiency and improve their livelihoods. Another significant trend highlighted by Njenga is the pressing issue of climate change affecting agriculture. The impact of climate change poses a threat to farmers' livelihoods, making sustainable farming practices and climate-smart agricultural techniques essential for building resilience. Njenga emphasized the need for farmers to adopt environmentally friendly practices to mitigate the adverse effects of climate change and ensure long-term sustainability in the agricultural sector. Furthermore, the interview shed light on the importance of value addition and agro-processing in boosting farmers' incomes and overall agricultural productivity. Value addition plays a key role in creating additional revenue streams for farmers and enhancing the value chain in the agriculture sector. Access to financing has been a persistent challenge for smallholder farmers, but the emergence of digital lending platforms, microfinance institutions, and cooperatives is providing new opportunities for farmers to secure loans and invest in their agricultural activities. When discussing the funding gap in agriculture, Njenga highlighted the limited access to traditional banking services for farmers in Kenya and across Africa. Traditional banks often perceive agricultural businesses as high-risk ventures due to factors such as the lack of collateral and the seasonal nature of agriculture. However, alternative financing options like microfinance institutions, agricultural cooperatives, and digital lending platforms are stepping in to provide innovative financial products tailored to the needs of farmers. Despite efforts from governments and international donors to support agricultural financing through grants, subsidized loans, and technical assistance, there remains a significant gap in funding for innovation and scaling initiatives in the sector. Njenga expressed concern over the inadequate support for scaling successful agricultural models and the limited access to credit for women and youth, who form a significant portion of the agricultural workforce. The interview underscored the need for more inclusive financial services and affordable insurance products to help farmers mitigate risks associated with farming. In conclusion, addressing the funding gap in the agricultural sector in Kenya requires a multi-faceted approach that combines innovative technologies, sustainable practices, and inclusive financing mechanisms. By leveraging advancements in agri-tech and promoting climate-smart agricultural techniques, farmers can enhance their productivity and resilience in the face of evolving challenges. Collaborative efforts from financial institutions, government agencies, and private sector stakeholders are essential in bridging the funding gap and unlocking the full potential of agriculture as a driver of economic growth and food security in the region.