- Commercial banks became farmers’ top lender, overtaking Saccos.
- Saccos and Hustler Fund borrowing declined as farmers sought larger, flexible loans.
- Most loans funded farm inputs, while borrowing for machinery increased
Commercial banks have overtaken Savings and Credit Cooperative Organisations (SACCOs) as the leading source of credit for Kenyan farmers, according to new data from the Central Bank of Kenya (CBK).
The CBK’s latest Agriculture Sector Survey shows that the share of farmers borrowing from commercial banks rose from 41 per cent in March to 58 per cent in May. The bank attributes the shift to lower lending rates following monetary policy easing.
Over the same period, borrowing from Saccos fell sharply, from 35 per cent in March to 24 per cent in May, even though the cooperatives have long been the preferred lender for many rural farmers.
Borrowing from produce buyers rose modestly, from 11 per cent to 16 per cent, while digital lenders, informal groups, and family or friends also remained significant sources of credit, though the survey did not break down their exact shares.
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Hustler Fund uptake declines
Farmers have also continued to move away from the State backed Hustler Fund. The survey recorded a sharp drop in the share of farmers accessing credit through the fund.
Many farmers say the fund’s borrowing limits, often capped at low amounts, are too small to cover major farming costs such as commercial inputs, machinery, or bulk fertiliser purchases.
CBK survey data tracked a significant decline in the fund’s user base among rural and urban farmers, even as government officials continue to defend it, with farmers instead turning to more flexible sources of finance.
How farmers are using borrowed funds
Farm inputs remain the leading reason farmers borrow. In May, 84 per cent of those surveyed said they used agricultural loans to buy seeds and fertiliser, down from 94 per cent in March. Labour costs accounted for 57 per cent of credit use in May, down from 62 per cent in March.
However, borrowing for equipment and machinery rose sharply, from 25 per cent in March to 41 per cent in May, suggesting farmers are increasingly using credit for longer term investment rather than short term running costs alone.
Why Saccos still matter
Saccos continue to play an important role in agricultural financing. They have traditionally attracted farmers by offering seasonal loans with flexible collateral options, including group guarantees rather than strict property deeds.
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Rooted in rural communities, Saccos also support collective bargaining for farm inputs and offer direct settlement systems after harvest.
Analysts note that by pooling member resources and encouraging disciplined saving, Saccos help cushion farmers against risks such as adverse weather or crop failure, a role commercial banks and digital lenders do not typically replicate.
By Mwiti Mukunga
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