Re-engineer Kenya agriculture finance to unlock potential

Kenya’s agricultural finance landscape presents a paradox: Agriculture is the backbone of Kenya’s economy, contributing 22 percent to GDP and supporting over 70 percent of rural livelihoods.

However, financing challenges hinder productivity, value addition, and commercialisation. Limited access to affordable credit, low private sector investment, and inefficiencies in financial policies prevent optimal sector growth.

Access to structured finance, particularly for smallholders, cooperatives, and agri-enterprises, remains fragmented and with high risk- perception and low financing appetite.

Market inefficiencies, limited skills in structuring finance instruments, limited policy coherence, lack of enablers and a narrow pipeline of bankable agri-projects have collectively stalled the access to finance and full commercialisation of agriculture.

Over the years, several institutional and policy responses have emerged, but gaps remain in their design, coordination, and implementation.

These include issues around credit guarantee frameworks, investor readiness programmes and technical assistance to both providers of finance as well as to the agri-enterprises, risk mitigation tools, and investment incentives.

Amid regional integration efforts and the shift toward climate-smart agriculture and food systems resilience, Kenya’s approach to agricultural financing requires recalibration.

There is a need for a broader reform initiative aiming to reengineer the agricultural finance ecosystem by identifying structural barriers, rethinking policy instruments, and proposing integrated, investment-friendly solutions.

The opportunity lies in enabling the private sector to participate more meaningfully in agriculture through better-informed policy frameworks and innovative financial models that reduce risk and attract long-term capital.

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Traditionally, the agricultural financing emphasis has been on the formal financial institutions such as commercial banks, MFIs and SACCOs. Going forward, there is need to consider the emerging role of informal financial mechanisms (e.g. village savings groups, rotating funds) on how they can complement formal systems.

This is particularly relevant for smallholder farmers and underserved rural areas where formal access remains limited.

There is also a need for a deliberate platform that should explore Kenya's agricultural financing environment, policies, markets, actors, and institutional mechanisms, with a view to informing a national level agri- investment strategy.

This would involve the generation of evidence to support reforms that would strengthen the sector’s financial architecture, improve credit access, and stimulate agri-investment through blended financing models and public-private partnerships among other financing mechanisms.

This will require interrogating how policies are designed and implemented, where market failures occur, and which financing pathways remain underutilised.

Beyond diagnostics, there is a need for deliberate effort to carry along the financial institutions, private sector as well as development partners. Unlocking the full potential of Kenya’s agricultural sector will also depend on embedding its financing reforms within broader continental trade and investment ambitions.

The African Continental Free Trade Area (AfCFTA) for instance presents a strategic opportunity to align national agricultural finance strategies with regional market integration, scale up intra-African agri-trade, and attract cross-border investments.

Stakeholders across government, finance, and agribusiness must now come together to design and implement a coherent national agricultural finance strategy that responds to market realities and regional opportunities. The time to act is now.

Kenya must commit to building a robust, inclusive, and investment-ready agricultural finance system that supports growth, resilience, and competitiveness across the entire value chain.

The writer is Lead Partner, Impact Africa Consulting.