By Kenya Confidential Agriculture Desk, Nairobi – April 2, 2021
The Eco.business Fund yesterday provided its first investment in Kenya’s agricultural sector amounting to Ksh 1 billion through Co-operative Bank of Kenya – a leading commercial bank in the country.
The subordinated loan will be lent to sustainable agribusiness enterprises, contributing to the Fund’s mission of conserving biodiversity, promoting the sustainable use of natural resources, and mitigating and adapting to climate change.
The investment will provide much-needed financing for businesses to enhance sustainable measures in their agricultural horticulture practices, particularly important in light of the challenging operating environment created by the Covid-19 crisis.
Problems facing farmers in Kenya
a) Many farmers in Kenya are peasant farmersand they do not have money to developtheir farms fully. Therefore, production per hectare is low.
b) When the harvest is good and the market has too much produce, prices drop. Therefore, farmers cannot make profit.
c) Farmers who take bank loans find it difficult to repay them when the prices of the products fall.
d) Drought conditions often affect crop production. Only wealthy farmers can
irrigate their land or use greenhouses during the dry season.
e) When it rains, some dry weather roads become impassable.
f) The level of poverty in the country and the level of competition on the world market sometimes makes it difficult for farmers to sell their produce at a profit.
Agriculture is Kenya’s Economic Backbone
Agriculture is the backbone of the Kenyan economy, employing approximately 75% of the rural population, and making up 34% of the country’s gross domestic product.
However, commercial lending to the agricultural sector remains disproportionally low. This funding gap limits the ability of producers and processors to invest in sustainable production practices, further compounded by the economic fallout caused by the global pandemic.
The investment aims to provide financial resources to those that need it most, while simultaneously promoting conservation finance as mainstream.
Dr. Jens Mackensen, Chairperson of the Board of Directors of the eco.business fund, stated: “We are excited about our first investment in Kenya: A country rich in biodiversity and opportunities for sustainable development. This new partnership with Co-op Bank promises to be a fruitful one as the bank is well-positioned to act as an enabler of sustainable production practices. Only by providing tailored financing to the agricultural sector, a key driver of economic activity and sustainable development in Kenya, can we collectively promote green finance with the goal of generating positive environmental and social impact.”
The Group Managing Director and CEO of Co-operative Bank Dr. Gideon Muriuki commenting on the sign-off of this partnership said: “Right from our founding as a bank for agriculture co-operatives, we have always strived to support farmers in their journey to achieve sustainable livelihoods.”
He added, “This new partnership with eco.business fund that makes available Ksh 1 billion for on-lending to farmers is a winner on many fronts; it provides financing that is structured to suit the financing cycles of agriculture, and also comes with the support mechanisms to assist farmers to make a successful pivot towards sustainable, climate-smart agriculture.”
Co-op Bank is the third-largest commercial bank in Kenya and the primary bank for agricultural cooperative societies. Through this new investment, the eco.business fund and Co-op Bank will provide necessary credit to sustainably certified agribusinesses, such as those in the coffee, tea, and horticulture sectors, Kenya’s main agricultural exports.
By financing green energy such as solar and hydroelectric installations for tea factories that will reduce reliance on fuelwood, and cold storage solutions and cut down post-harvest losses. Thetwo partners hope to boost sustainable production practices and conserve the unique ecological landscape of the country.