Impact of agricultural finance in Kenya. case of Agricutural Finance Corporation.
The Agricultural Finance Corporation was established in 1963 and reconstructed on 21st March 1969 by an Act of Parliament Cap.323. The main function of the Corporation was to assist in the development of Agriculture and Agricultural Industries. This it would achieve by making loans to farmers, Cooperative Societies, Public bodies, Local Authorities and other Persons engaging in agriculture or agricultural industries. The Corporation was empowered by the act as a body Corporation with perpetual succession and a common seal. It was granted authority and power to acquire, own, possess and dispose of property and to contract and sue and be sued in its own name. The Corporation was exempted from the Companies and Banking Acts. Agricultural Finance Corporation offers different loan products key amongst them are, seasonal crop credit open line, other seasonal crop production loans, mechanization loans, livestock development loans, loans for plantation crops and loans for legal entities. During the year 1998, Kshs 172.98 million was lent to farmers, which was a decline from Kshs 249 million lent in 1997. Due to the reduced lending the principal loan portfolio fell by Kshs 55 million from Kshs 2,253 million in 1997 to Kshs 2,198 million in 1998. The total loan portfolio however increased by Kshs 149 million from Kshs 3,561 million in 1997 to Kshs 3,710 million in 1998. This increase of 4.2% is a result of poor loan repayments. In the same year (1998) Kshs 425.3 million collected in 1997. The story of ever decreasing repayments became a constant feature in the history of Agricultural Finance Corporation. (A.F.C annual report 1998). In the similar manner, Kenya Rural Enterprise Program (KREP) was established as a non Governmental Organization in early eighties. Its main task was to provide financial services to other institutions for on lending to small-scale entrepreneurs. This method did not work satisfactorily. KREP transformed itself into a big institution offering services to entrepreneurs directly. Its main products are Chikola (Group Loans) and Juhudi (targeting individuals). Through continuous researches KREP today have the small holder agriculture credit project. This facility is being implemented in Kibwezi, Taita Taveta and Migori. It is an initiative aimed to access small holder farmers in the rural areas with credit for agricultural development. Its popularity with the farmers is because apart from the group guarantee, no other tangible collateral is required. The research therefore delved in assessing the impact of the loans extended by the Agricultural Finance Corporation both on the recipient farmers the appropriateness of the disbursement methodology. A comparison made with other institutions mostly Non Governmental Organizations extending credit to Agriculture. It will be of significance and interest to look at a facility like the small holder Agricultural Credit, currently offered by the Kenya Rural Enterprise Programme (KREP).