In the first of our brand new series of Farming First TV interviews, Kanayo Nwanze, the President of the International Fund for Agricultural Development (IFAD), talks to Farming First about the extent to which helping smallholder farmers access bank loans can set them on their way to growing their businesses and securing their futures.
In the video below, Nwanze describes a project in which IFAD and Alliance for A Green Revolution in Africa (AGRA) have been providing guarantees that enable farmers to obtain bank loans from Kenyan lender, Equity Bank.
The initiative, launched in 2008, helps “the beneficiaries to grow their businesses so that they can own collateral and go into the mainstream banking system,” Nwanze explains.
AGRA and IFAD initially provided a 10 per cent risk-sharing fund in the form of a $5 million deposit that enabled Equity Bank to provide a 20 million loan project to small producers. The default rate was less than 1 percent, and the project then grew as more banks wanted to participate.
The impact of such projects can be transformative, affording even farmers of the smallest scale the opportunity to transition from microfinancing into the banking mainstream.
Nwanze describes meeting a woman farmer from Awassa, Ethiopia, who started with $100. “Within ten years, she’d been able to grow her business from one cow to seven cows including a heifer. She’d been able to buy land,”
Watch our video for the full interview with Kanayo Nwanze.