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Experts demystify climate-smart agriculture financing in Kenya

Photo from a project in Kenya looking at the impact of climate change on agriculture. Farmers need to be provided financial access opportunities to tackle the effects of climate change. Photo: N. Palmer (CIAT)
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Jul 22, 2020

by

Faith Gikunda

Regions

A recent webinar provided an opportunity for investors and climate-smart agriculture actors in Kenya to connect to share knowledge and inform policies.

Finance is increasingly becoming a critical tool for addressing climate change challenges. All the agriculture sectors—crops, livestock and fisheries—are heavily impacted by climate change. The increasing impacts imply the urgency to financially empower farmers and other food system actors to adopt technologies and practices that cushion them against the impacts of climate change. However, while there are financial access opportunities, the availability of information on existing financing instruments remains scanty, making it difficult for small-scale farmers to utilize existing opportunities.

To combat this difficulty, dozens of organizations in Kenya have come together to form the Climate Smart Agriculture Multi-Stakeholder Platform (CSA-MSP), to support stakeholders working on agriculture and climate change to share knowledge and inform policies. The CSA-MSP has a thematic group on financing and investments whose role is to seek intelligence and develop connections between the platform members and existing investors.

Ms. Veronica Ndetu, the head of the Climate Change Unit at the Ministry of Agriculture, Livestock, Fisheries and Cooperatives (MOALFC) and coordinator of the CSA-MSP, notes “there are numerous opportunities that climate-smart agriculture (CSA) investors could provide towards implementing the existing Climate Smart Agriculture Implementation Framework, hence the main purpose of the CSA platform is to connect investors with existing CSA actors.” The impact of this linkage is two-fold; not only does it spur financial investment but it  also support the sharing of technical expertise by platform members with investors in the development of CSA-focused investable cases.

A recent webinar provided an opportunity for investors and CSA actors to connect. Several investment portfolios were presented by invited organizations, including SNV, Solidaridad, Oikocredit and Financial Access.

Watch the webinar recording:

Existing potential CSA investment tickets

According to Sebastian Oggema, Project Manager of the SNV-led Climate Resilient Agribusiness for Tomorrow (CRAFT) project, it is necessary to avail funds for CSA investments and to ensure that ventures meet the basic requirements to qualify them as climate-smart by addressing adaptation and mitigation objectives. The CRAFT investment focuses on the potential to engage and impact small-scale farmers, food security, and innovative CSA practices and technologies. The project also addresses income generation and job creation for women and youth, and addresses the gender gap by enhancing women’s control over equipment, assets and sales income. The CRAFT investment uses a value chain, market-led approach, which is a critical component in fostering an entrepreneurial community of small and medium enterprises (SMEs), farmers’ enterprises (cooperatives), service providers and government practitioners.

According to Rakula Okoth of Solidaridad, investment-funding opportunities for CSA investments are limitless and have moved from the traditional lending to newer technology-supported approaches. Giving the example of PlusPlus, a European NGO-backed impact investment platform which supports SMEs by mobilizing investors via an online platform, he observed that it is possible for start-ups to get funding which was initially very difficult with the traditional lending approach due to collateral requirements. PlusPlus provides crowd-sourced funding to agri-food smallholders in emerging markets, which contributes to sustainable economic development.  

To Oikocredit, their entry point on climate change is through environmentally compliant enterprises. In Kenya, they focus on key commodities like coffee and tea. This, according to Geoffrey Kioko Musyoki from Okiocredit, translates to an improved quality of life for smallholder farmers and rural low-income households and communities. Oikocredit's short-term plan focuses on stimulating increases in farm productivity, greater crop diversification and farm resilience through CSA, which in the long-term ensures that the smallholders and rural households increase their income.

Building capacity for CSA investment

Federico Lande, Partnerships Manager at Financial Access, stressed the need for capacity building of financial institutions to sustainably build or expand their agri-finance business and investment portfolios. This is essential in ensuring that the institutions understand the investments they are funding and strengthen their capacity to offer suitable solutions. Financial Access works with both financial institutions and smallholder farmers in emerging markets to provide data analytics, risk scoring, tailored financial advisory services and fine-tuning solutions to make small-scale lending profitable, climate-smart and scalable. This helps reduce operating costs and lowers credit risks for financial institutions.

Nancy Rapando, a steering committee member for the CSA-MSP and a member of the technical working group on investments, observed that the platform will continue to profile more public and private financial providers and identify opportunities for investment in CSA and link SMEs to investors. A key role that the platform will play beyond linkages is to support existing cases by actors to become investment-ready depending on the type of finance they would be interested in.

Are you involved in climate-smart agriculture in Kenya and interested in joining the CSA-MSP? Please let us know by filling out this online form

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The webinar was organized by the Kenya Climate Smart Agriculture Multi-Stakeholder Platform with support from the Ministry of Agriculture, Livestock, Fisheries and Cooperatives (MOALFC), the CGIAR Research Program on Climate Change, Agriculture and Food Security (CCAFS) and Biovision Foundation.