Impact of agricultural finance in Kenya. case of Agricutural Finance Corporation.
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Date
2004-10
Authors
Amimo, C.M.
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Abstract
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).
Description
Department of Business Administration, 61p. 2004