Agriculture and Livestock Development Cabinet Secretary Mutahi Kagwe has called for a major overhaul of Kenya’s agricultural financing model, urging financial institutions to shift from short-term, high-interest lending toward affordable, long-term facilities that reflect the realities of farming.
Speaking during the 8th World Congress on Rural and Agricultural Financing, hosted by the African Rural and Agricultural Credit Association (AFRACA) in Mombasa, Kagwe said that Kenya’s agriculture sector, which directly and indirectly contributes nearly 50% of the country’s GDP, requires financial solutions aligned with its seasonal cycles and long-term capital needs.
“We should stop locking farmers into short-term, high-interest facilities and instead take a long-term view. Lend at low interest rates and encourage farmers to adopt modern methods by embracing technology. Push contract farming, sign futures contracts, and promote participation in commodities and futures exchanges,” Kagwe said.
The CS revealed that the government is in the process of merging the Agricultural Finance Corporation (AFC) with the Commodities Fund to enhance scale, efficiency, and responsiveness to farmers’ financing needs.
He also disclosed plans to raise AFC’s core capital to expand access to affordable agricultural credit.
Kagwe proposed the reinstatement of a policy that once required commercial banks to lend a mandatory portion of their assets to the agricultural sector.
Currently, agriculture accounts for only 3% of total bank credit — a situation he described as unacceptable for a country where farming remains the backbone of the economy.
“We somehow abandoned this requirement along the way,” he said.
“This aggregated pool of funds would provide sufficient, easily accessible capital at single-digit interest rates. It should be reinstated.”
To further strengthen sector financing, Kagwe proposed the creation of an Agricultural Fund for the AFC, modeled on exchequer-backed initiatives such as the Political Parties Fund and the Constituencies Development Fund (CDF).
He suggested that the fund be allocated a fixed share of national revenue to ensure sustainability and predictable support for farmers.
“It therefore makes sense to support the agricultural sector by setting up a similar fund for the Agricultural Finance Corporation,” he added.
The Congress brought together policymakers, financiers, and development partners from Africa, Asia, Europe, and the Americas to explore innovative financial solutions for agriculture.
Kagwe also highlighted broader reform efforts within the ministry, including the creation of a Projects Implementation Monitoring Unit (PIMU) to oversee agricultural investments and the rollout of digital systems under the Kenya Integrated Agriculture Management Information System (KIAMIS), which has already registered over 7.1 million farmers nationwide.
Themed “Innovating Finance for a Resilient and Inclusive Agri-Food System,” the Congress underscored Africa’s shared determination to reform agricultural credit markets, promote digital innovation, and build farmer-centered financing systems to strengthen food and nutrition security across the continent.
