Agriculture Finance Corporation rules out waiver of interest on farmers’ loans

Agriculture Finance Corporation rules out waiver of interest on farmers’ loans
Former roads minister Franklin Bett. Photo/File

The Agriculture Finance Corporation (AFC) has raised concern over the high default rate by farmers taking loans from the state agency.

According to AFC the default rate had hit a high of 56 percent with most farmers failing to repay their loans.

Agriculture Finance Corporation Chairman Franklin Bett says farmers had developed a notion that money from the agency was a grant that is in turn crippling its ability to support financial access to the sector.

“There is need for soul searching amongst us as farmers. Let us remove this notion that money from AFC is a grant or free money from the government. That is not so,” Mr Bett said.

The remarks come as barley and wheat farmers from Narok County continue to press for their loans to be waived after drought affected their harvest.

The farmers have accrued penalties in excess of Sh750 million after failing to make prompt payments on their loans.

Financial institutions have been slowing down disbursement of credit to farmers, with credit risk managers arguing that banks were unable to tie the credit to the farmers’ cash flow resulting in tighter controls.

State owned Agriculture Finance Corporation has suffered the brunt of the high defaults which saw the corporation struggle to play its role in aiding financial access.

Mr Bett said AFC was unable to waive the loans as it also has financial commitments from donors to meet.

“We are also getting funds from the World Bank and the African Development Bank and we would want the farmers to benefit but we must pay back the loans. This imagination that this is free government money and it doesn’t need to be paid is not right,” stressed the chairman.

AFC gets Sh2 billion annually from the government to provide loans to farmers at a subsidized rate but the fund has been dogged by cases of default.

The state agency has enlisted the services of credit reference bureaus to speed up loan recovery.

Additional Reporting by Denis Otieno

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