Expanding the Agricultural Finance Frontier: A Kenyan Case

Agriculture is the mainstay of the Kenyan Economy. However, agriculture has experienced low productivity over the years. Poor access to agricultural finance has been identified as a contributing factor to low crop productivity. Kenyan agriculture has undergone some fundamental changes which have profoundly affected agricultural financial services. In addition, most financiers shy away from lending to the agricultural sector because of the covariant risks related to rain-fed agriculture. Given this background, we undertake a comparative analysis of emerging models of agricultural finance that have expanded the agricultural finance frontier to the smallholder farmers. Key findings indicate that demand for farming credit takes the highest proportion of the credit needs among the rural households, thus accentuating the importance of agricultural finance. The state run model of agricultural financing has the lowest financial sustainability. On the contrary, the community financing models are the most likely drivers of change in the rural finance landscape