CS Kagwe: Only 3% of bank loans reach Agriculture

Agriculture Cabinet Secretary Mutahi Kagwe has taken a hard stance against commercial banks, accusing them of neglecting the agricultural sector by committing just three per cent of their total loan book—currently valued at Sh6 trillion—towards agriculture.

Speaking at the 2025 Summit on Financing Agri-Food Systems Sustainably (FINAS), Kagwe described the state of agricultural lending as “a sad indictment” and demanded a radical rethink in how banks evaluate and engage smallholder farmers.

"Agriculture contributes up to 50% of our GDP through direct and indirect linkages. Yet only 3% of the banking sector’s loan book goes to this sector. This cannot continue," he said on Tuesday.

Kagwe dismissed traditional banking excuses such as the high-risk nature of farming, inadequate collateral, and underdeveloped rural markets, calling them outdated in today’s digital era.

Instead, he challenged banks to craft financing models that respond to the realities of agriculture, including seasonal production cycles and smallholder constraints.

"...be more creative and alive to the intricacies of farming as a business. Push contract farming. Sign futures contracts and encourage participation in the commodities and futures exchanges," he urged.

He also pointed to the vast financing shortfall faced by African smallholder farmers, pegged between USD 60 billion and USD 100 billion annually, and called on both the government and private sector to take decisive action.

The CS called for a return to a scrapped policy that required banks to dedicate a fixed percentage of their lending to agriculture, arguing it once helped steer critical financing into the sector.

“In the past, there was a rule requiring financial institutions to lend a portion of their assets to agriculture. We abandoned it somewhere along the way. It’s time to bring it back,” he stated.

He proposed strengthening the Agricultural Finance Corporation and expanding access to tailored products such as insurance and futures contracts to help de-risk farming. Kagwe emphasized that the conversation around finance was not just about money, but about preserving the dignity of farmers.

“This is not just about credit, it is about dignity and sustainability for our farmers. Let us stop locking them into short-term, high-interest traps,” he said.

Held from May 20 to 22, FINAS 2025 brings together African and global stakeholders under the theme “Taking Ownership: Rethinking Sustainable Financing for Africa’s Food Systems.” The summit aims to generate bold action to close the financing gap through inclusive and resilient investment strategies.

Discussions at the event are centered on scaling access to capital through cooperative strengthening, de-risking investments, improving regulatory frameworks, and digital innovation.