Limited access to affordable financial services impacting youth participation in agribusiness in Kenya

Poor financing makes it hard for young people to enter into agribusiness and commercialize their new agricultural ventures. In fact, the majority of youth in agriculture today raised capital through their personal savings or via family contributions having failed to secure long-term funding from banks.

At the same time, the bureaucracies associated with rare financial aid from the government make such support systems inaccessible to youth. And without adequate initial financing, young people have little motivation to invest in agriculture for obvious and near-valid reasons such as the inability to acquire resources and farm inputs.

But there are numerous reasons why banks are slow to extend their loan portfolios to young Kenyan farmers. Some of the top reasons why banks won’t give loans to farmers are as follows

Risk involved

Financers generally consider agriculture is a risky investment due to pests and disease outbreaks, extreme weather conditions in most parts of the country, and the seasonality characteristic of the Kenyan agriculture caused by its heavy dependence on rainfall.

Underdeveloped agricultural insurance

Insurance and credit go hand-in-hand in lowering financial institutions’ lending risks. The insurance in agriculture is not well-developed. And without agricultural insurance, financial institutions often find lending too risky to take.

Wrong targeting

Despite the above mentioned barriers, a number of financial institutions still offer financial products to farmers. Youth agripreneurs can try getting loans from Barclays Limited, Commercial Bank of Africa, CFC Stanbic Bank (access their loan fact sheet), Chase Bank, Co-operative Bank of Kenya, Juhudi Kilimo, Kenya Commercial Bank (KCB) in partnership with Sygenta and Technoserve under Mavuno loans program, Sidian Bank, and Kenya Women Finance Trust – KWFT.

The only challenge is that loan portfolios offered by some of these companies are not easily accessible to many young people because the products do not adequately target youth.

The risk of lending to youth

Lending to youth is perceived by formal financial service providers as a risky venture. One reason for this is that young people, mostly those who are out of the formal employment, lack the collateral and financial capacity banks need to approve loan requests.

Also, many youths have very bad financial records and poor saving culture in addition to the fact that the education system does not equip students with a strong financial literacy.

Lack of agricultural experience

Many youths approach the banks to borrow money yet they lack the agricultural skills necessary to run a successful agribusiness venture.

Leave a Comment