Is this unique Ksh10M loan what your agribusiness needs?

Nothing is more expensive than a missed opportunity, they say. But when what stands between you and that opportunity is traditional financial institutions that have inadvertently de-prioritised lending to the type of business you are running, the odds can be stacked up high against you.

Now, when this opportunity is in agribusiness, you are faced with a unique set of financing challenges that you have to navigate if you are to earn a living from the sector that employs about 60 percent of Kenyans – agriculture – without necessarily being a farmer.

And the agribusiness opportunity is very grounded. Everybody needs to eat to stay alive. Which then means somebody has to produce this food and another has to transport it. Before then, someone has to provide the seed, the fertiliser, the agrochemicals, protective gear plus anything and everything between the farming and when the food is served on your table.

And that essentially is what agribusiness is. All the businesses that facilitate the processes that culminate with food on your table, but not necessarily the act of farming. Hence, and for the purposes of this discussion, agribusiness encompasses the following types of businesses:

1. Input-side agribusinesses: These are all businesses that facilitate the acquisition of agricultural inputs by farmers; that is, local businesses that buy inputs from importers and manufacturers, and sell them to SMBs (small to midsized businesses), smaller inputs suppliers, farmers, etc. Examples include agrovets, stockists, fertiliser suppliers, and seed distributors.

2. Produce-side agribusinesses: These are all the businesses that facilitate the transfer of produce from farmers to the marketplace (not the final consumer). They are local businesses that buy produce from farmers and smaller SMBs, and sell them to supermarkets, manufacturers, exporters, etc. Examples include aggregators, processors, exporters and suppliers.

Whoever has access to capital has access to the profits

If indeed everybody needs to eat to stay alive, then surely, there must be lots of profits to be made in agribusiness, since the demand for food is “always on”, come rain, literally, come shine.

But also, as we can deduce from the types of businesses described above, agribusinesses can be quite capital-intensive, and the money is not always available when it’s needed. That is why access to financing is critical to the success of any agribusiness, especially if you are an SME. And this is where the challenge we alluded to earlier emerges.

According to a 2018 study by the global management consulting firm, Dalberg, despite agriculture contributing 33 percent of Kenya’s GDP, agri-SMEs in the country receive only 2-7 percent of the total bank credit.

One of the reasons cited by commercial banks for the low credit levels to agri-SMEs is the difficulties in assessing their creditworthiness due to informal practices such as poor record-keeping and small size. Local commercial banks, the report says, tend to favour larger enterprises.

Data from the Kenya Association of Manufacturers (KAM) shows that the country has over 7.4 million SMEs, but only 1.56 million are licensed. This effectively means that nearly six million businesses, including agri-SMEs, find it hard to access the much-needed credit so that they too can share in the profits to be made from agriculture.

The good news is that there are new microfinance lending models that are coming up to cater to the lending needs of agri-SMEs that for years have had their growth prospects dimmed by traditional financiers.

One such intervention that is providing customised financial services to agri-SMEs is Avenews. Founded in 2017, the company's platform enables digitisation of the agricultural supply chain and enables agri-businesses to run their entire business operations through a set of financial management tools that control inventory, generate trade documents, and initiate payments directly to counterparties.

Meet Peter

Avenews: Providing up to Ksh10 million in agribusiness loans

Avenews has created what the company describes as the financial Super App for the agricultural industry in Africa. It is in cognisance of the challenges of access to financing as well as the record-keeping inadequacies agri-SMEs grapple with, that the Avenews Super App was designed.

With Avenews, you get all the tools an agribusiness would need in one app. From money and trade management tools to digital payments and access to financing.

In addition to helping agri-SMEs formalise business operations, streamline payments and manage cash-flow, the Avenews Super App allows one to apply for financing in minutes directly on the app.

Since your business is formalised through the app, with the Avenews Super App, you get immediate and recurring access to short-term credit subject to qualification, such that if you identify an opportunity with a time limit on it and do not have the cash, you can apply for a loan immediately on the app and “grab” those profits.

How Avenews loans work

Avenews provides its users with “short-term working capital loans”. That is a loan to fund trade transactions such as buying stock, fulfilling LPOs, increasing production, among others. Whenever your agribusiness needs a quick cash injection towards processes aimed at making the business profit, you are looking for a working capital loan.

Avenews, through its Super App, allows you to borrow as much as Ksh10 million in short-term working capital loans. Depending on whether your agribusiness is on the input side or the output side, the size of the business and the transaction you seek to fund, Avenews offers loan tenures of between two to six weeks.

To apply, you first fill a short application form available on the Avenews website. Next, an Avenews agent contacts you to complete KYC (know your customer), during which you are asked to provide a number of documents, such as bank and M-PESA statements, business registration certificate, trade history, and so on.

Once you are approved, the amount you’ve qualified for is disbursed into your Super App Wallet, from where you can make payments to your suppliers and anyone else you need to pay. You can also transfer the amount from your Super App Wallet to your preferred bank account or M-PESA as needed.

On repayment, you can either make a bank transfer to the Avenews Absa Bank account or via M-PESA Paybill to the Avenews Absa Bank account.

Once you have applied for the first time, you only need to request for another loan through the Super App directly. The entire process is digital, but Avenews may conduct a site visit to your agribusiness as part of the loan appraisal process if, for example, your business does not have enough documentation or statements.

Additionally, your business has to be formally registered. Avenews does not finance informal/unregistered agribusinesses. You also need to have a good credit history since Avenews checks your CRB standing as part of the loan consideration process.

Avenews agribusiness loan pricing

As compared to other lenders who have a fixed rate for loans regardless of circumstances, Avenews’ loan pricing factors in the benefit a borrower is going to derive from utilising the funds. As such, the loans are priced in a profit-share model, where the borrower agrees to pay a percentage of the profit they anticipate to make from the transaction the loan is financing.

This means each individual borrower will receive a bespoke loan quote from Avenews based on the specific factors unique to their business, chief being the profit margin.

Avenews says the objective is to ensure a business, given the profit projections associated with the transaction(s) the loan is going to fund, is guaranteed to financially benefit from taking this credit facility.

So, instead of a fixed interest rate as many traditional lenders will impose on a loan regardless of whether you make a profit or not, Avenews charges an “access fee” that is based on the mark-up (profit margin) per trade cycle.

In sum, each loan is priced depending on the specifics of the business after reviewing, for example, turnover and profit margin among other factors considered by Avenews’ internal AI-powered decision engine and their risk team.

Apply for an Avenews loan at: