Improving Access to Finance for Agriculture Market Systems in Resource Poor Environments: Learnings from KCDMS

The Feed the Future Kenya Crops and Dairy Market Systems (KCDMS) Activity is a five-year (October 2017-November 2022) activity of the USAID-funded Feed the Future initiative implemented by RTI International. The activity aimed to improve productivity and development of competitive, resilient and sustainable dairy and horticulture market systems in selected counties in Eastern and Western regions of Kenya. This was to be achieved by facilitating the private sector market-driven partnerships and investments that assure development of promising value chains through increased productivity, quality improvements and greater supply chain efficiency.

Financing was identified as a key factor in the intensification and diversification of agricultural value chains. For this reason, KCDMS implemented several approaches to increase access to finance among agro-enterprises and smallholders, including supply augmentation and demand stimulation.

Notable Achievements of KCDMS

KCDMS undertook the following initiatives:

• Co-invested with financial institutions to develop and scale physical infrastructure and information technology (IT) systems for agriculture finance.
• Supported development of technical capacity to finance institutions for agricultural lending.
• Brokered high-value finance and private capital through a blended finance approach.
• Originated pipelines that linked finance demand and supply.
• Promoted finance ecosystem pathways.

Lessons and Recommendations

Several learnings and recommendations can be deduced from KCDMS’s implementation of access to finance interventions in resource-constrained settings, including the following:

1. Diverse lenders/investors, rather than exclusive relations, have potential to produce pronounced results.
2. Early structuring of financier relationships is principal for success.
3. Co-investment of matching funds for agriculture and related sectors are effective in unlocking private sector funds, including external finance.
4. There is need for greater use of and knowledge of de-risking instruments.
5. Taking an ecosystem approach to facilitate finance requires patience and time.
6. Capacity building of credit staff on agribusiness value chain financing is a significant supply side enabler in unlocking the agribusiness portfolio growth for functional service providers (FSPs).
7. It is worthwhile to track additional expansion and investments experienced out of the project catalyzed growth.
8. There is an opportunity to expand agriculture insurance.
9. There is loaded value in partnerships between market system development projects and FSPs.
10. Sound and agile business models are able to attract long-term capital.