AFC reveals Sh1.4 billion dud loans to customers
Workers put the final touches to the Agricultural Finance Corporation stand at the Agricultural Society of Kenya, Eldoret National Show on February 28, 2023.
The Agricultural Finance Corporation (AFC) has revealed a Sh1.4 billion non-performing loans (NPLs) portfolio, representing 15.2 per cent of its total Sh9.2 billion loan book.
AFC is a State-owned Development Financial Institution (DFI) mandated to assist in development of agriculture and related industries by loaning farmers and entities in the sub-sector.
The disclosures covering the period to January 27, 2025, comes as the development finance institution seeks the services of a new life assurance company to protect itself from the risk of loss if a borrower dies or becomes disabled. AFC’s total loan portfolio largely covers facilities issued to persons aged between 18 and 69 at Sh8.7 billion and Sh448.9 million handed out to persons aged 70 to 94.
The bulk of non-performing loans is also associated with the 18 to 69 cohort at Sh1.4 billion which contrasts with defaults covering 70-to-94-year olds at Sh43.2 million.
The AFC has further revealed 7,891 clients serviced by its balance sheet where a majority of 7,545 customers have accessed loans of up to Sh5 million each.
Some 6,709 loan accounts belonged to persons aged 18 to 65 and held Sh8.8 billion of the DFI’s total Sh9.2 billion portfolios.
The AFC is wholly owned by the Government of Kenya and focuses on financing the agriculture sector value chains to stimulate development of the crucial sector.
The DFI makes loans farmers, co-operative societies, incorporated group representatives, private companies, public bodies, local authorities, and other persons engaging in agriculture or line industries.
AFC is mandated to provide managerial, technical, and administrative advice for players in the agriculture sector.
The fund has a loan interest rate of 10 per cent on reducing balance even as products such as sugarcane under special projects are given at the rate of five per cent on a reducing balance basis.
AFC doesn’t put a cap on the maximum loan amount and instead determines it on a business proposal presented by a client and the ability to implement it as well as repayment capacity.
The Auditor-General’s office has previously accused AFC of failing to apply due diligence in disbursement of funds to some farmers, in what has put its internal controls and lending framework into question.
The DFI began as the Land and Agricultural Bank of Kenya in 1933, first serving the interests of white settlers before its transition to independence.
The corporation is headquartered in Nairobi and has operations segmented into six regions with 47 branches across the country.