Originally published: April 29, 2008
Source: allAfrica.com
The food crisis is visiting the world. Food riots due to ever increasing prices for basic foods have been reported. Some governments have been forced to step in and artificially control the cost and export of basic food items. For Kenya, the post election violence that affected mostly the food producing areas of the country complicates the problem further.
Lack of access to innovative rural financial services and over-reliance on microfinance to rejuvenate agriculture in rural Kenya compounds the problem. Microfinance is making its contribution in alleviating poverty in urban and rural Kenya. However, microfinance cannot fully transform agriculture in its current form of "one size fits all financial products" and lack of flexibility in product offerings. Credit constraints are frequently experienced by small holder farmers. In Kenya, the second-hand clothes trader is more likely to receive a loan than the rural farmer. Both businesses have different cash flows and microfinance business model favours one over the other.
Only effective, well designed rural financial services, done by sector sensitive, but best practice focused institutions will help this vital sector in Kenya. An injection of innovative and sector targeted microfinance services could prop up the rural areas and directly contribute to agriculture and reduction in crime. Towards this, the government should facilitate a sector dialogue with financial service providers, input producers and suppliers and marketing agencies to develop a strategy of innovative rural credit access to small holder farmers. A KES10,000 (US$162) loan, innovatively designed could be all the farmers ever needed.
- Read the complete article: Is Microfinance Failing Agriculture? (allAfrica.com)
- Related News: The Food Crisis and Its Threat to Microfinance (1 May 2008)