Nairobi is set to host the second Financing Agrifood Systems Sustainability (FINAS) 2025 Dialogue Conference from 20th to 22nd May at the Kenyatta International Convention Centre (KICC).
Stakeholders in the agri-food systems sector on Tuesday convened for an insightful pre-conference dialogue, a build-up for the FINAS 2025 Conference in Nairobi.
The one-day workshop on loan classification taxonomy focused on the vital role of the agricultural loan classification system in accelerating financing for the food and agriculture sectors.
The workshop was convened by GIZ Kenya, the FINAS 2025 Conference Secretariat, and AgriFinancing and included input from agricultural lending institutions and regulators, AGRA, and FSD-K, amongst others.
Speaking during the pre-conference dialogue in a Nairobi hotel, technical advisory manager at Rootooba Limited, Dr. Charity Mutegi, said that a structured framework for categorising loan data can offer deeper insights into sectorial and value chain exposures and borrower profiles.
“A uniform system (taxonomy) will improve reporting accuracy, highlight funding gaps, support informed decision-making, and strengthen risk management,” said Mutegi.
She said that one of the issues addressed in last year’s FINAS dialogue was the pressing need for improved data for decision-making around agri-food systems and agricultural financing.
“Our vision as stakeholders is to create better data on credit exposure across value chains and actors in agriculture to improve agricultural lending and financing in the agri-food systems,” she said.
Mutegi said that stakeholders are relooking and repurposing financing based on pressing needs within the agri-food system. This could be as a result of shocks like the pandemic or the fact that “we have been financing the agricultural sector in a way that needs rethinking.”
She said discussions on how a uniform taxonomy will improve reporting accuracy, highlight funding gaps, support informed decision-making, and strengthen risk management controls were covered.
“The conversations will revolve around policy and regulations, de-risking investment in agriculture, youth agenda, aspects of state functionality, and leadership leading towards meaningful financing in the agri-food sector,” she added.
CEO AgriFinancing Maarten Susan said that with taxonomy and with a better loan reporting system, stakeholders will be more effective in supporting the different segments within agricultural value chains.
“We want to have much better insight into different value chains. Where is access to credit needed most? Is it in dairy farming? Is it in horticulture? Is it fish farming? At this point, we just don’t know,” he said.
“For example, we can support smallholder farmers more effectively to get loans to upscale their businesses. We can support aggregators and input providers,” he added.
The CEO divulged that many banks worldwide struggle with financing agriculture because they view it as a very risky venture.
“The way banks and microfinance institutions report right now is very high level. But what we really lack is detailed insight into what credit goes to, which value chain, what actors, smallholders, input providers, and processes; where does credit actually go?” he quipped.
He also said that economies are also struggling with double-digit interest rates, which is seen as a very big problem.
“We cannot grow this sector effectively when farmers, especially smallholder farmers, pay rates in excess of 20 percent,” he said, adding that access to credit is impaired and that is why such a classification system is important.
Aceli Africa Country Director Sharon Mosin said that increasing agricultural finance, especially capital flows to agricultural small and medium enterprises (SMEs), has been a challenge, and the gap to financing agricultural SMEs remains.
According to Aceli Africa, original data confirms that risk in Agri-SME lending is twice as high as in other sectors while returns are 4 to 5 per cent lower, limiting capital flows to agricultural SMEs today.
“Agricultural SMEs need reliable access to finances to realise their growth and impact potential,” she said, adding that when you talk about agricultural financing, most people think of farmers. But the focus normally is on production and the entire agri-food system and taxonomy.
She said that structured data and reporting will allow banks, lenders, and stakeholders in agricultural finance to pinpoint the largest gaps in lending within the sector. In turn, this will support tailored solutions and more effective lending strategies in the sector.
“Through our products, which are de-risking mechanisms and incentives to subsidise the costs of originating Agri-SME loans, we have seen increased lending to agricultural SMEs, particularly by commercial banks,” she said.
FINAS 2025 will bring together a diverse audience of delegates ranging from producers, policymakers in the National and County Governments, development partners, Financial and insurance institutions, Agricultural technology service providers, as well as input suppliers.
By Anita Omwenga
