Farmers in Kenya can now access credit based on the produce from their farms.
The Africa Banking Corporation(ABC) Bank has signed an a agreement with East Africa Exchange (EAX) which will facilitate farmers to use their produce deliveries to get financial services from the bank.
Farmers and traders supported by EAX will be expected to deliver their farm produce to warehouses approved by the bank. The bank will then give a farmer an electronic warehouse receipt depending on the quantity and quality of their produce. It is through this receipt, the bank will use as a collateral to provide financing to the farmer or trader.
The ABC bank says it uses an integrated platform with national payment systems and mobile banking solutions to clear and settle the process. This will provide quick and efficient method for the bank to issue credit to farmers and traders and to collect the funds.
The EAX, a commodity exchange, supports farmers in all five countries in the East African community (EAC) to access agricultural and financial markets and access to finance. The EAX also aims at establishing partnerships between the farmers for faster trading in the region, and through this the farmers will be able to get competitive pricing for crops. This will in turn help the farmers and traders access higher credit from financial institutions.
This partnership is will also enable farmers protect their produce against storage-related damage, by providing container hire essex which if safe and efficient unlike previously when farmers could incur huge losses in their own storage before reaching the market.
According to the ABC Bank Group Managing Director, Shamaz Savani, the farmer suffer from a range of constraints including price fluctuations and their weak bargaining position. But the warehouse receipts, the farmers will now be able to bargain for better prices for their produce in the market, which will increase their income for more investment in farming.
Agriculture is a key driver of the Kenyan economy, contributing directly to about 26 per cent of Kenya’s Gross Domestic Product (GDP) according to a Kenya Economic Report, 2013. The sector directly employs 18 percent of Kenyans and supports 60 percent of total employment. It is also the main source of livelihood for almost 80 per cent of Kenya’s population living in rural areas.
Shamaz Savani says through financial partnerships with the farmers, the country can attain food security to support its rapid growing population by producing more food, and creating employment.
By helping farmers access loans in Kenya, the ABC bank will enable help increase produce by farmers and create employment and self reliance.