Farmers linked to aggregators to benefit through an innovative financing

By Bob Aston

Smallholder farmers from Ol-Moran Ward, Laikipia West Sub County linked to Laikipia Produce and Marketing Cooperative Society will start benefiting from an innovative financing from K-rep Bank.

This is after K-rep Bank accepted an expression of interest from Laikipia Produce and Marketing Cooperative Society for it to become one of the banks aggregators. The two organizations held a meeting at Ng’arua Maarifa Centre on July 17, 2015 to finalize discussions on how to implement the initiative.

K-rep Bank has entered into a partnership with Department for International Development’s (DFID’s) Finance innovation for Climate Change Fund (FICCF) to provide innovative financing to sorghum, cassava and legumes farmers linked to aggregators in their bid to adopt Climate Smart Agriculture approaches, practices and technologies.

“K-rep Bank will work with the cooperative to provide clear funding and repayment system for loans by farmers. The cooperative has to provide a clear link to the end market for their farmers. The cooperative will also qualify for some loan financing instrument,” said Sylvia Kamau from K-rep Bank.

Sylvia taking the cooperative committee through the requirements

Sylvia informed Laikipia Produce and Marketing Cooperative Society that as an aggregator they will be able to access subsidized loans and technical assistance from K-rep Bank as well as FICCF. She said that the bank is also partnering with APA insurance to ensure that farmers produce is guaranteed.

She said that individual farmers will be able to receive loans from K-rep Bank through the cooperative. Aggregators are required to open an account with K-rep Bank while individual members of the cooperative who want to benefit from the initiative must also open an account with the bank.

There is no ceiling for loans while interest rate is negotiable at 16 percent. This will depend on the intended project and projections. Interest rates for farmers is also 16 percent although it is also negotiable.

 The cooperative will act as security for the members hence farmers will not be required to produce collateral in order to receive a loan. The partnership with FICCF is for 3 years while agreement with aggregator is continuous until loan is repaid. Repayment period will be agreed upon with the cooperative.

The cooperative is an aggregator of cereals but are planning to diversify to other value chains.  They have been addressing the challenges facing smallholder farmers in procuring farm inputs and marketing of produce. The cooperative has also been empowering smallholder farmers with skills to aggregate farm produce and become agribusiness oriented.