Financing Agriculture sustainably

The proactive role of the government in financing agricultural projects in Africa.

Financing Africa's Agriculture Sustainably

Farming is considered a high-risk business, that's why commercial banks restrain from lending to this sector, especially smallholders. On the other hand, governments across the world finance agriculture through subsidy kitties. Development organizations also play a very important role in financing agriculture through donations and community work.

What is the current approach of the government in funding agriculture?

 In Kenya, the Agricultural Finance Corporation (AFC) is the sole government agricultural bank mandated to finance various farming activities eg purchase of machinery, rehabilitation of land, start-ups, processing plants, etc through affordable loans. Aspiring beneficiaries are expected to proactively present funding proposals or business plans for AFC to decide whether to finance their project or not.
The other way the government finances agriculture is through affirmative action funds, where youth groups or women present business proposals for funding.
This approach of funding is dependent on the proactive nature of agri-entrepreneurs to go out and seek funding from the government.
One major challenge with start-ups in all sectors is the lack of capital. This impedes the capacity of start-ups to conduct a quality feasibility study to substantiate the viability of a business. Most agribusiness projects are based on a misinformed or incomplete feasibility study which leads to a high failure rate.

My suggestion

In my view, the government has resources and the capacity to conduct a comprehensive and robust feasibility study whose findings can offer better guidance to aspiring agribusiness inventors on which projects are better suited where. Certain studies such as soil mapping, underground water resources assessment, rainfall patterns, disease cycles, market availability, etc are complex and sometimes too expensive for farmers to conduct them effectively. They would bear better results if conducted by the state.
Following the findings of such a study, the government can recommend certain agribusiness projects in certain areas. To attract the private sector to invest in the recommended projects, the government can introduce a subsidy program as an incentive to encourage private investments in agriculture.
This could be a perfect strategy to attract private investment in agriculture and more so a smart strategy for the government to spend its agricultural subsidies on low risk and research-proven high productive agricultural projects.
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