Credit linkage platform organized for finger millet value chain actors in Western Kenya
For the last three years, the finger millet component of the ICRISAT-led project on Harnessing Opportunities for Productivity Enhancement (HOPE) in Western Kenya has focused on enhancing grain productivity and marketing by improving access to quality seed, recommended agronomic practices, production inputs and product markets. In the process, it has developed partnership with the Kenya Agricultural Institute, farmer groups, Ministry of Agriculture (Extension), local NGOs, agro-dealers, grain traders, processors and financial institutions.
Although grain productivity rose from 4 bags to 8 per acre, farmers and other stakeholders cite inaccessibility to credit and grain markets as major constraints to sustainability and impact. With this in mind, a credit linkage platform for finger millet value chain, consisting of 20 finger millet value chain actors and service providers, was organized in Busia Town on 19 June to assess credit needs in all segments of the chain and to identify the range of available credit products in the financial sector to match the identified needs.
The assessment started with a key informant survey, followed by focus group discussions and meetings with key financial institutions operating in the project. The platform was attended by Daniel Otwani and Patrick Audi (ICRISAT-ESA) and facilitated by Charles Muigai of Enterprise Institute Ltd, Nairobi.
Results indicate that farmers needed credit to finance purchase of fertilizer and postharvest equipment while agro-dealers needed them to increase their fertilizer and seed stocks.
At harvest time, producer groups require credit to buy grain on cash payment from their members for aggregation before accessing buyers who may take a while to pay. Finger millet grain processors reported they needed credit to buy grain from farmers in cash as supermarkets and other retail outlets only pay them a month after product delivery and also to buy additional equipment to facilitate increase in processing capacity.
Subsequent discussions with four different banks rated highly by farmers revealed that only Equity Bank provided a suitable loan product, “Kilimo Biashara” (farming as a business), to match the credit needs of the finger millet farmers and other stakeholders. To qualify for a Kilimo Biashara loan, farmers have to be a member of a producer group, two group members have to stand guarantee, monthly loan repayment must be made before grain harvest, and a maximum loan amount of Kshs 100,000 (US$ 1200) at 15% interest is given.
Further discussions with the Bank revealed that successful repayment of the loan hinged on a reliable grain market, the presence of aggregation centres, a loan repayment enforcement tool, a contract with clear terms for all parties, and automatic channeling of income from produce to the farmers account in Equity bank.
A meeting between the actors in the finger millet value chain and the Equity Bank to discuss possible loan product negotiations is on the cards. The activities are part of the CGIAR Research Program on DrylandCereals.