The Agricultural Finance Corporation (AFC) is a Development Finance Institution that was established in 1969 by the Kenyan Government to help farmers and other agricultural players get loans to finance their farming projects. It is still functional to date.
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| Agricultural Finance Corporation (AFC) |
Its primary purpose is to assist in the development of agriculture and agricultural industries in Kenya by providing loans to different kinds of players in the agricultural sector.
Who can get AFC loans?
You can get a loan from the Agricultural Finance Corporation of Kenya even if you are a small-scale farmer. It finances:- Individual farmers
- Cooperative societies
- Incorporated group representatives
- Private companies
- Public bodies
- Local authorities
- Other entities engaged in agriculture or related industries.
Understanding AFC Loans
AFC offers a variety of loan products
tailored to meet the diverse needs of the agricultural sector. These loans are
designed to support both small-scale and large-scale agricultural activities,
including crop production, livestock farming, and other agribusiness ventures.
Notably, AFC provides loans at attractive low-interest rates of 10% per annum
on a reducing balance, making financing more accessible to farmers. AFC is currently the best and most affordable financier of agricultural projects in Kenya.
Eligibility Criteria
To qualify for an AFC loan, applicants
must meet certain criteria:
- Engagement in Agriculture:
Applicants should be actively involved in agricultural activities or
related industries.
- Legal Entity:
Eligible applicants include individual farmers, cooperative societies,
incorporated group representatives, private companies, and public bodies.
- Creditworthiness:
Applicants must demonstrate the ability to repay the loan, which may
involve providing collateral or other forms of security.
AFC Collateral Requirements
You will be require to provide some form of collateral in order to secure a loan from the Agricultural Finance Corporation
(AFC) of Kenya. In the past, this collateral has included assets such as land, buildings, or
other immovable property. However, recognizing the challenges that some farmers
face in providing such security, AFC has been exploring alternative collateral
mechanisms.
One such initiative is the Warehouse
Receipt Financing model, which allows producers to use warehouse receipts as
collateral. This system enables farmers to access credit backed by the value of
their stored produce, providing a more flexible and accessible form of
security.
Additionally, AFC offers flexible loans
with no traditional security requirements. These products are designed for
farmers and agro-dealers who may not possess conventional collateral but have
sufficient cash flows to meet loan obligations. This approach aims to enhance
financial inclusion within the agricultural sector.
It's important to note that collateral requirements may vary depending on the specific loan product and the applicant's financial profile. If you would like to borrow a loan from AFC, please consult directly with them to understand the most suitable options available to you. They have offices in most major towns in Kenya.
Application Process
The process of applying for an AFC loan
involves several steps:
- Loan Application: Submit a written application in the prescribed form, detailing the purpose of the loan and the proposed agricultural activities. They will guide you on this when you visit their offices.
- Evaluation: AFC assesses the application to determine the viability of the proposed project and the applicant's creditworthiness. In this process, they request for some information from you which you must give truthfully.
- Approval:
If the application meets all necessary criteria, it is approved by the AFC
Board.
- Disbursement:
Upon approval, the loan amount is disbursed to the applicant under the agreed
terms and conditions.
Benefits of AFC Loans
Accessing loans from AFC offers several
advantages:
- Affordable Financing:
With interest rates set at 10% per annum on a reducing balance, AFC loans
are cost-effective for farmers.
- Tailored Products:
AFC provides loan products specifically designed to cater to the unique needs
of the agricultural sector.
- Government Support:
As a government institution, AFC aligns its financing with national
agricultural development goals, offering stability and reliability.
Recent Developments
The Kenyan government has demonstrated its commitment to supporting farmers by allocating Ksh 10 billion to AFC in the Medium-Term Budget period of 2024/2025 financial year. This funding aims to finance priority value chains, enabling AFC to provide more affordable loans to farmers across the country.
Other Organizations that Give Agricultural Loans in Kenya
There are other private financial
institutions that provide loans to farmers and agricultural industries. These
include:
- Juhudi Kilimo: A microfinance institution that provides asset financing and technical assistance to smallholder farmers and small-to-medium agribusinesses throughout Kenya.
- Faulu Microfinance Bank: A well-established institution providing a range of financial services, including agricultural loans, to support smallholder farmers and agribusinesses.
- Kenya Women Finance Trust (KWFT): Specifically focuses on empowering women in agriculture by providing tailored financial products and services.
- SMEP Microfinance Bank: Offers a variety of microfinance products, including agricultural loans, to support small and medium enterprises (SMEs) in the agricultural sector.
- Musoni Microfinance: A mobile-based microfinance institution that provides accessible and affordable loans to farmers through their mobile phones.
- Co-operative Bank of Kenya: A commercial bank that also offers agricultural financing options to farmers and agribusinesses.
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