Kilimo Biashara Lives, Bringing hope to Kenya’s smallholder farmers

Samuel Mwangi has lived in Bura-Tana amid a vast expanse of sky and aggressively rambling mesquite bushes, known locally as mathenge, for 20 years. He has lived here since before the collapse of a government-run irrigated cotton project that brought his family and many other landless farmers to the area. Most of those who remained survived by selling charcoal made from the mesquite.

Mwangi cultivates a plot of maize. His livelihood is directly influenced by Mount Kenya, whose towering presence rules the rains. Like about 75 percent of his fellow Kenyans, Mwangi is a small- scale farmer with a primary school education. He has eked a living from the soil, trying to meet his family’s food needs, raise a little cash and assure that at least some of his children make it to secondary school. Mwangi would be surprised to be thought of as a businessman.

But to AGRA and its partner, Kenya’s Equity Bank, smallholder farmers like Mwangi are the backbone of Kilimo Biashara, a $50 million (3 billion Kenyan shillings) loan project made possible by AGRA’s Innovative Financing Programme, which is designed to turn farmers’ agricultural subsistence into viable businesses.

AGRA catalysed the project by setting up a $5 million (400 million KSh) “cash guarantee fund” that buffers the bank’s risk of lending money to farmers and small agricultural businesses with little or no collateral. The $5 million was posted jointly by AGRA and the International Fund for Agricultural Development (IFAD). 

Nationwide, Kilimo Biashara is set to make financing available for 2.5 million farmers and 15,000 agricultural input retail businesses in
rural areas. So far, the programme, which was launched in May 2008, has disbursed 240 million shillings ($3.1 million) in loans to smallholder farmers. The loans carry a 12 percent interest rate applied when the loans fall due – a rate well below the bank’s standard lending rate of 18 percent.

Some of the maize in Bura-Tana is already as high as the proverbial elephant’s eye, and nearly 500 acres extend in every direction. Mwangi’s field – and those of his neighbours – benefits from another partner: the Kenyan government, in the form of the National Irrigation Board (NIB).

“We expect to harvest about 2,000 tons of maize from eight of the nine villages in the project by May,” says Raphael Ngenga, the
Equity branch manager in Garissa, a town on the Tana River. The river will provide the water that will irrigate 5,000 acres to be planted to hybrid maize under the loan programme worked out last year with the NIB. The project will release farmers from their dependence on erratic rains.

The goal is to have a total of 2,000 farmers participate in the project with loans averaging 50,000 shillings ($650) each per planting
season in groups of six farmers who act as co-guarantors. So far, the project has loaned 7.1 shillings ($92,207) to 250 farmers growing maize on 497 acres.

Word of the project’s initial success has already spread throughout Coast Province, and more than 150 additional farmers are now applying to participate, in addition to those already registered who are now seeking a second loan for the next planting season.
 
Meanwhile, business has picked up for Magiri Manene, the only agro-dealer in Bura. All the farmers in the project obtain their 10 or 20 kg of Kenya Seed’s PH4 hybrid maize seed from his crowded shop, as well as their fertiliser and other inputs.  The farmers sign an invoice and a receipt that Manene later presents to Equity Bank for payment, which comes out of the farmers’ loans. A 2-kg packet of seed costs 260 shillings ($3.38). A farmer needs 10 kg of seed for 1.5 acres and 20 kg for 3 acres. Manene also helps prospective
new members of the project to fill out the loan application forms, which he then forwards to Equity’s Garissa branch.

This year, Mwangi is looking forward to harvesting 75 90-kg bags of maize from his three acres. After paying back his 50,000 shilling
loan as well as his share of tractor rental and irrigation fees – a total of 5,500 shillings ($71) per planting season – he hopes to pocket around 100,000 shillings ($1,300) for the first of three yearly planting seasons, based on the current government-suggested price of 2,300 shillings ($30) a bag. Three of his five children are in school, and the other two will likely go to the new school being built with proceeds from the project’s first successful harvest.

Although most everyone is satisfied with the results of the first phase of the project, Ngenga said there have been a few surprises. Some of the farmers took the inputs and disappeared, leaving their debts to other members of their groups. Others neglected the land (it is held in tenancy but owned by the NIB). Moreover, the process of monitoring the proper application of fertiliser hasn’t been very effective. Finally, no one counted on the monkeys, who were among the first to appreciate the succulent young cobs of maize!

But looking back on the year since he first went seeking business in Bura-Tana, Ngenga surveyed a field of nearly ready-to-harvest maize. “You can see the product in the field; we have the inputs, and we have the water, so I didn’t see much risk.”

There is every indication that the first harvest will be very good.