"Financing micro-irrigation development in the Kenyan National Agricultural Value-chain Development Project” by “Rose Mwaniki and Jonathan Denison at the 2023 Water for Food Global Conference. A recording of the presentation can be found on the conference playlist: https://youtube.com/playlist?list=PLSBeKOIXsg3JNyPowwJj6NDSpx4vlnCYj.

1. Financing micro-irrigation development in the
Kenyan National Agricultural Value-chain Development Project
Rose Mwaniki and Jonathan Denison 20th October 2022

2. Kenyan National Agricultural Value-Chain
Development Project (NAVCDP)
Project objective
To increase market participation and value addition for targeted farmers
in select value chains in project areas.
(targeting … small scale farmers transitioning from subsistence to commercial, or
are selling only a small percentage of their produce commercially)

3. NAVCDP Characteristics
IDA financing
250 Million USD (2022 – 2027)
Follows from two high performing VC project (NARIGP / KCSAPS)
Covers half the country
Community driven development approach (CDD)
Farmer organization development (FPOs / MSPs)
Market infrastructure and ag-equipment financing
Knowledge development (FFS)

4. Irrigation Potential, Benefits and Enabling Conditions in Kenya (2021 diagnostic with GoK, WB and WRG2030)

5. FLID Catalytic Approach in Overview
• Focus on geographies & localities where surface and shallow-
groundwater are readily available.
• Promote partnerships through MSP’s including equipment
suppliers, agribusiness off takers and financing institutions
(SACCOs, MFI’s etc.)
• Encourage private sector partners to provide a package of irri-
support services (tech-suppliers, agro-processors)
• Make affordable finance accessible by facilitating / brokering
between farmers and financial service providers

8. FLID Tech approach within wider value-chain
knowledge and financial support …
1. Enable access to pumps and irri equipment
2. Support water storage in farm ponds
Well proven
technologie
s Kenya and
across Africa
Futurepump
Sunpump
Sunculture
Lined RWH
farm-ponds

9. File name
‘Farm’ ponds piloted in current WB financed NARIG
Program in Kenya using surface runoff (60 - 200 cu.m)
Expanded farm-pond component in NVCDP Program

10. 2023/06/07 10

11. Financing options for micro-irrigation in NAVCDP
The hard problem – FIs do not want to
take risk of loans (USD 1000 to 3000 / ha)
for small scale farmers

12. Financing options for micro-irrigation
in NAVCDP
The hard problem – IFIs and many
Governments ALSO do not want to take
the risk of guaranteeing loans (USD 1000
to 3000 / ha) for small scale farmers !
NAVCDP

13. Financing options for micro-irrigation in NAVCDP
Complementary options
with each other and with
interventions 1 and 2
The hard problem
– PAYG needs private sector suppliers to get on board
(exciting option but traction is slow < 3000 units in Kenya)
- Subsidies are conceptually simple, but present risks
(dependency inducing, misuse, undermining markets)

14. NAVCDP irrigation equipment
micro-financing approach
From options to practical (hard!) realism

15. Current Microfinancing model for irrigation in Kenya
• A snap assessment (telephone) of 4 big MF banks and 3 rural based non deposit taking
MFIs confirm that there is currently no defined microfinancing model for irrigation in
Kenya.
• Irrigation projects within the MF subsector are financed under asset or agribusiness loan
products; loan decision is based on appraisal and repayment pegged on all available
income streams and guarantees.
• Three (3) of the MFIs (KWFT, Juhudi Kilimo, ECLOF) have made attempts to partner with
irrigation equipment suppliers but with little success.
• However, all 7 MFIs have working partnerships with water harvesting and storage
suppliers (tanks, roofing gutters) – (thus some level of funding)

16. Current Microfinancing model for irrigation in Kenya
In the same survey, 4 big Rural based SACCOs were interviewed and their response was
similar to that of the 7 MFIs that;
• SACCOs lack specific loan products for irrigation. Loans for irrigation are accessed through
value chain or assets financing or normal loan products, respectively.
• Guarantee for these asset/equipment loans are secured by the purchased asset, income
generating capacity of borrower supported by guarantees.
• SACCOs have more favorable terms than the MFIs (e.g. loan price range between 12-15%
for SACCOs compared to 24-36% for most MFIs)

17. Current Microfinancing model for irrigation in Kenya
Thus, credit risk exposure in irrigation lending is perceived relatively high due to the
following two key issues;
i. First, MFIs/SACCOs lack technical capacity in regard to: irrigation equipment
selection, installation, demonstration and after sales management,
agronomical support to boost production; season targeting and crop
management
ii. Second, the unstructured markets for most value chains (with the exception of
dairy value chain) compounds the risks of irrigation funding by the
the MFIs/SACCOs

18. Proposed Microfinancing model for irrigation in Kenya
As part solution for this current situation in Kenya, the new World bank funded
National Agricultural Value Chain Development Project (NVCDP, P176758), SACCOs and
revolving funds have been identified to overcome the constraints in creditworthiness
and long-term access to capital for smallholder farmers.
Both the MFIs and SACCOs included in the survey recommended the following
financing model that;
• Reduces both technical and credit risk for the lender while;
• Improve irrigation usage, increase productivity and profitability to the
smallholder

19. Proposed Microfinancing model for irrigation in Kenya
Smallholder
farmers
SACCOs/M
FIs
Irrigation
equipment
suppliers
Agri-
business
off takers

20. Proposed Microfinancing model for irrigation in Kenya
 SACCOs/MFIs
 Members funds/matching grants
 Credit terms
 Insurance
 Irrigation equipment suppliers
 Demonstration
 Installation
 After sales support
 Agronomic services
 Agribusiness off-takers
 Tripartite agreement with farmer and SACCO
 Aggregation of farmer produce
 Loan repayment to SACCO