Increasingly, agriculture reclaiming its niche and importance in African economies
Over the years, rising population growth, adverse climatic conditions and neglect of the agricultural sector in many Sub-Saharan African (SSA) countries among other developing world countries has led to food insecurity with frequent, cyclic droughts leading to devastating famines. To date food yields have continued to decline and are blamed on among other factors climate change, poor farming techniques and low financing of agricultural sectors in the continent.
The above realities have led to heightened search for solutions. The hosting of the Financing Agri-Food Systems Sustainably (FINAS) conference 2025 in Nairobi on May 20th, 2025 fits well with the search-for-solutions initiatives.
As a prominent guest at the event, Kenya’s Agriculture & Livestock Development Cabinet Secretary (CS) Sen. Mutahi Kagwe described the event as timely and critical offering a platform for dialogue, reflection and action in the face of persistent and urgent calls for resilient food systems, equitable access to financing of agriculture and fairer market systems.
Why is the agricultural sector so paramount for Kenya? Sen. Kagwe outlined that Kenya’s economy posted a nominal gross domestic product (GDP) of K sh 16.224 trillion in 2024, but sadly allocating only 3 per cent of her national budget to the agricultural sector. Yet the sector directly contributed 22.5 per cent to the GDP in that year, making it the single largest GDP contributor.
Moreover, the sector contributes another 25 per cent -30 per cent through indirect linkages to other sectors. According to Sen Kagwe, essentially agriculture contributes to 50 per cent of Kenya’s GDP. The frequent suggestion that the budgetary allocation to the sector be raised to 10 per cent shall not only be adequate investment in the sector but also meet requirements of the Malabo Declaration of 2014 –on the Comprehensive African Agriculture Development Program (CAADP), and the Jan 2025 Kampala Declaration. This would increase productivity by 45 per cent, eliminating -harvest losses, and triple intra-African trade in agri-products by 2035.
To uplift the sector, the country must also focus on and tackle issues related the sector priorities, efficiencies, impact and accountability. For instance any additional financing of the sector must be based on past lessons and be accounted for. The most pressing challenges must be the priority as well as a recalibration of funding mechanisms to reflect changing needs. The CS affirmed that this is a fiduciary responsibility that we must not shirk.
In recent months, CS Sen Kagwe has formed an independent Projects Implementation Monitoring Unit (PIMU) within the CS office. This comprises competent personnel from the ministry, and other stakeholders; they are required to continuously monitor implementation at the last mile, and report back on a monthly basis.
Urgently, agricultural financing in Kenya must be actualized, asserted CS Sen Kagwe. The massive financing gap, estimated at USD 60 (7740 B) to 100 (12900 B) billion (B) annually and especially among smallholders should be tackled. Here, of the total commercial banks loan-book of US$49 B in 2023, only 3 per cent was lent to the agricultural sector.
Notably, poor lending to farmers has resulted from perceived high risks, lack of collateral, poor access to financial services, and underdeveloped rural capital markets. He urged and challenged financial institutions to be more creative and alert to the intricacies of farming as a business. The institutions must innovate and acknowledge the reality that farming and crop cycles may mean not very high return on business despite the high costs in capital and non-capital investments made by the government, development partners and farmers. The institutions should lend at low interest rates, and encourage clients to adopt modern farming methods, by embracing technology, for better yields and incomes. Kagwe felt the need for pushing contract farming participation in the commodities and futures exchanges.
Despite these realities, there is this need a paradigm shift, to a more inclusive, innovative, and sustainable financing ecosystem: it is not a wonder that a past regulation required financial institutions to lend a certain percentage of the assets under their administration to the agricultural sector. The rule was later abandoned according to Sen Kagwe. He opined that an aggregated pool of funds would help in providing sufficient, easily accessible capital at single-digit interest rates. He appealed for the formation of an agricultural development fund (within the Agricultural Finance Corporation –AFC) akin to the Political Parties Fund (at 0.3 per cent) and the Constituencies Development Fund (NG- CDF) (at 2.5 per cent) of the national government’s revenue.
Hon Sen. Kagwe appreciated the AFC for attaining remarkable achievements in servicing capital demand for the agricultural sector. Yet AFC only services 25 per cent of the demand today and hence the move in recapitalizing it. Its operations in the last 60 years prove a viable business model. Further, the AFC is due for merger with the Commodities Fund, for economies of scale, and to drive growth into the next decade revealed the CS.
Notably, the private-sector has been identified as, and indeed proved a key partner in Kenya’s agricultural transformation and hence the government reforms in institutional, policy, legal and regulatory frameworks to enable a better physical and policy environment for doing business. Already under implementation is the National Agro-ecology for Food Systems Transformation (NAE-FST) to promote regenerative agriculture and reduce carbon footprint. As recommended in the FINAS 2024, the government is finalizing the Policy and Legal Framework on Agricultural Financing and Subsidy Management — this will positively impact risks management , help in transparent subsidies allocation and expand private sector participation.
Further, mutually beneficial partnerships with the private sector, digital innovation and the youth have been realized. Through the Kenya Integrated Agriculture Management Information System (KIAMIS), 6.4 million farmers have been registered with geo-tagged land parcels and digital farm profiles. The KIAMIS is enabling targeted subsidy delivery, traceability, and improved credit scoring. Tech-savvy agri-prenuers have been trained and empowered in Kenya School of Agriculture (KSA) to cover the sector’s last mile and to supplement e-extension services.
Moreover, a big data centre has been established at KALRO, leveraging real-time datasets from public and private actors to inform policymaking and market access. All these assets and capabilities are under consolidation in a revamped Agricultural Information Resource Centre (AIRC), targeted to be a centre-of-excellence, innovation hub, incubator, and accelerator for AgTech firms offering bundled services (viz. weather-based crop insurance, digital loans, soil analytics, and input delivery) to farmers via mobile phones. Courtesy of the Digital Agriculture Roadmap (DAR), investments will be realized, data become interoperable, and trust will be built.
Additionally, the country is piloting blended finance models, where public capital crowds in private investment. For instance, through the Kenya Cereal Enhancement Program (KCEP-CRAL), thousands of farmers now access subsidized inputs and training through private service providers, with performance-based subsidies. Essentially, all public, private, philanthropic, and research institutions must partner, the CS observed.
Moreover, the sector must harness blockchain for traceability, satellite data for crop monitoring, and AI for credit scoring. Youths must be given incentives to take up this challenge. In conclusion, he urged that no farmer should lag behind in these initiatives. According to him, in unity, resilient, productive, and prosperous agri-food system that nourishes people and powers African economies must be built. {Ends}
