By Aoma Keziah
Worth Noting:
- Speaking at the Warehouse, Managing Director, George Kubai, highlighted AFC’s commitment to delivering tailored financial solutions for the agricultural sector.
- “Recent reports indicate that Kenya loses about 30% of its food production after harvest. Approximately 20% of this is wasted at the farm gate, while the rest is lost during marketing. Due to inadequate storage facilities, losses in the maize crop range from 40% to 60%. This situation is indeed a serious concern. The feasibility study on warehouse receipt financing aims to address these critical issues by providing a structured solution to reduce postharvest losses.” Remarked Kubai.
FSD Kenya, the Agricultural Finance Corporation (AFC), the Warehouse Receipt System Council (WRSC), and AGRA jointly presented the findings of a comprehensive feasibility study on warehouse receipt financing, a system that could significantly impact smallholder farmers across the country.
Key Highlights:
Limited Harvest Output and Market Behavior: The study revealed that the majority of smallholder farmers in Kenya typically experience only one harvest season, with an average output of less than five tons per harvest. It was noted that most of these farmers sell their entire produce immediately after harvest, and only consider independent storage when there is a surplus. This pattern reflects a preference for quick sales due to the immediate need for income.
Mixed Interest in Warehouse Receipt System: Despite the general lack of familiarity with the WRS among smallholders, nearly two-thirds expressed interest in participating in the system. The interest is largely driven by the benefits of enhanced safety and security of produce, better financing options, and the potential for higher prices by leveraging the high supply season. However, some smallholders remain disinterested due to the perceived flexibility of independent storage, concerns over warehousing costs, and logistical challenges.
Potential at the Cooperative Level: The study suggests that interventions at the cooperative level could be more effective in promoting WRS adoption. Cooperatives typically have a higher awareness of the WRS, and members are more likely to understand the potential benefits and challenges. This presents an opportunity to introduce warehouse receipt financing solutions at a community level where they could be more readily accepted and utilized.
Financial Inclusion and Challenges: The study highlighted impressive levels of financial inclusion among smallholders, with 85% having access to finance through mobile money agents. However, challenges remain, particularly in accessing adequate financing. The lack of sufficient collateral and the low financing requirements (KShs. 50,000-100,000) are major impediments to accessing necessary funds. Although Kenya’s digital financial services (DFS) space is expanding, post-harvest finance solutions remain limited, underscoring the need for targeted financial products for smallholders.
Speaking at the Warehouse, Managing Director, George Kubai, highlighted AFC’s commitment to delivering tailored financial solutions for the agricultural sector.
“Recent reports indicate that Kenya loses about 30% of its food production after harvest. Approximately 20% of this is wasted at the farm gate, while the rest is lost during marketing. Due to inadequate storage facilities, losses in the maize crop range from 40% to 60%. This situation is indeed a serious concern. The feasibility study on warehouse receipt financing aims to address these critical issues by providing a structured solution to reduce postharvest losses.” Remarked Kubai.
The study sheds light on the current state of smallholder farming in Kenya, particularly focusing on the adoption and potential of the Warehouse Receipt System (WRS) as a tool for financial inclusion and post-harvest management.
“For long, the Agricultural Finance Corporation has relied on traditional forms of collateral to facilitate loans for farmers and MSEs. This approach has historically favored men over women, as women in Kenya have often lagged behind in land ownership, which is necessary for such collateral. As a result, this lack of ‘hard’ or ‘right’ collateral has exacerbated the challenge of accessing loans for smallholders. Women and MSEs stand to benefit significantly from strengthening alternative financial solutions, such as warehouse receipts, discounting, and factoring. Given that smallholder farmers can lose up to 50% of their harvest due to inadequate warehousing solutions, these solutions offer more inclusive access to finance.” Said Tamara Cook, FSD Kenya’s Chief Executive Officer.
The joint study is a crucial step toward understanding the dynamics of smallholder farming and the financial tools that can support it, ultimately aiming to empower farmers and boost agricultural productivity in Kenya.
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