- Women and youth in Kenya’s agricultural sector are set to benefit from new AfDB funding.
- Another $1.3 million has been set aside to support the youth and women entrepreneurs in Kenya’s agriculture value chains.
- The funding was provided by the European Union in partnership with the AfDB.
Kenya’s women and youth in agriculture are set to benefit from fresh financing after the African Development Bank (AfDB) approved an equity investment of $19.65 million in the Africa Guarantee Fund (AGF).
Another $1.3 million will support the youth and women entrepreneurs engaged in the country’s agricultural value chains. The funding, approved on June 6, 2023, was provided by the European Union (EU) under its partnership with the AfDB.
“The approval is another milestone in the implementation of the partnership with the EU, which also signals the importance given to the role of women and youth in the agricultural sector in Kenya,” the Bank Group’s Director General for East Africa Nnenna Nwabufo noted.
SME financing in Kenya
The demand for Micro, Small, and Medium Enterprises (MSME) financing remains unmet in Kenya. Covid-19 pandemic, the Russia-Ukraine war among other global crises are aggravating the situation.
A survey launched in May by the Financial Sector Deepening Kenya (FSD Kenya) and the Financial Access Initiative (FAI) at New York University (NYU) shows that 49 percent of MSMEs found that high-interest rates and strict repayment timelines prevent them from accessing credit.
About half of the small businesses in Kenya blame the high cost of credit as the biggest barrier to financial access. Consequently, this pushes them to opt for informal options such as shylocks to cover liquidity shortfalls.
“They frequently look to sources other than banks, such as their own suppliers, for loans. They rarely take any operating risk that could result in negative monthly cash flow,” reads the report.
Other barriers to formal loans include a lack of collateral (22 percent), paperwork (17 percent), availability (14 percent) and design (six percent).
While around 60 percent of the small firm owners have bank accounts, which they use for business purposes, the majority move less than a quarter of the transactions there.
“Every time they can seize an opportunity, they have to contend with a wave knocking them back-particularly because of a lack of liquidity and working capital,” managing director of the global study and the FAI at New York University Timothy Ogden said.
The International Finance Corporation (IFC) estimates an SME financing gap of $19.38 billion, representing 30 percent of the country’s GDP. The World Bank’s Covid-19 Business Pulse Survey shows that many potentially viable firms are still struggling.
Women and youth in agriculture
Kenya’s agriculture sector employs the largest share of the population, especially in rural areas. Overall, it accounts for about 60 percent of the country’s exports.
Data by the Kenya Youth Agribusiness Strategy 2017-2022 indicates that 64 percent of the unemployed Kenyans are youth (18 to 35 years old), with the majority moving away from agriculture to fast-growing non-agricultural sectors in urban areas.
There are numerous barriers that women and young people must overcome in order to acquire financing and expand their enterprises. Inadequate access to networks and information, legal, societal, and policy restrictions abound. A lack of business management skills, and insufficient funding choices that address their particular needs are a few of these.
Due to the poor quality or scarcity of available assets as security, commercial banks rarely finance agriculture-based enterprises. Due to typical smaller firm sizes, banks frequently view women-owned enterprises as risky. Therefore, encouraging private investment and assisting women entrepreneurs are essential in promoting Kenya’s growth.
The Kenya National Bureau of Statistics’ 2017 Economic Survey indicates that lending to the industry in 2016 was only 3 percent. This was due to the significant risk associated with this customer segment.
