Agriculture is the main source of livelihood for people in the world having most surviving on less than $1.25 per day. In Africa, 70 percent of the total amount of food consumed is obtained from the small holder farmers, thus making them a critical factor within the African economy considering the drastic population growth increasing the demand for food.
Small holder farmers are increasingly becoming the most sought-after group of farmers by multinational companies in a bid to satisfy the demand of food and provide a secure sustainable supply of their products. However, small holder farmers are faced with a myriad of challenges the main factor being lack of funds to grow their farm and expand their farming projects. They are unable to source for funds directly from the banks, as banks are yet to set themselves in a position to serve small holder farmers effectively. For banks to serve small holder farmers effectively, they are required to have flexible products to meet the cashflow system of farmers, develop alternative asset security and mitigation of risks to determine the farmers portfolio and how well they can pay back their loans.
Farmers have been left to seek niched banks such as microfinance banks and saccos to get loans as it becomes much easier for them as the niched banks mainly partner with NGOs. However, the niched banks are limited in terms of their distribution and restrictive product terms making it a challenge for the small holder farmers. This leaves small holder farmers with no where to turn to, despite the fact that Agriculture is the main sector that is to alleviate poverty in Kenya and solve the issue of hunger facing African countries.
THE MAIN PROBLEMS AFFECTING SMALL HOLDER FARMERS
Limited access to bank credit: the banking industry view farming as a much risky sector.
Lack of formal value-chain finance
Complicated land laws and tenure systems limit the use of land as collateral making financing agriculture unattractive to the formal banking industry.
Inadequate financial and marketing skills to meet the quality standards set by fresh produce markets and food processors.
Entrepreneurial capacity gaps.
Large post-harvest losses.
Lack of a consistent and reliable market to facilitate proper planning.