()

The conditions imposed by Covid-19 exposed many flaws in the agriculture value chain and the Micro and Small Enterprises (MSE) sector. However, every cloud has a silver lining, this exposure has brought to the fore the problems facing farmers and micro-entrepreneurs. As a result, stakeholders are racing to find ways to improve farmers and entrepreneurs resilience.

Photo Credit

The Government of Kenya implemented various initiatives to help farmers and micro-entrepreneurs deal with the effects of Covid-19. This included direct transfers to vulnerable persons, Ksh.3 billion MSE credit guarantee scheme, Ksh.3 billion for the supply of farm inputs through e-vouchers[1] etc. However, a survey done by Microsave Consulting[2] found that only 7% of farmers surveyed had received direct support from the government. Another survey[3] of micro-enterprises found that 73% of the surveyed businesses had not received any direct support from the government. The reason most farmers and micro-entrepreneurs did not receive government support is because they are not registered in any government records or databases due to their informal nature.

To address this, the Government should establish a database of farmers in the country by employing available digital tools. This should capture details of farmers farm location, farm size, crops grown and animals kept etc. This should be linked with the farmers identity number and phone number. This would enable government and other development partners provide support to farmers in an efficient manner through direct cash transfers or even e-vouchers for farm inputs. The database would catalyze deployment by both private sector players and development partners of digital technologies offering various services to farmers.

More broadly the government needs to finalize the planned Kenya digital identification (ID) system, whose implementation has been hobbled by legal disputes and operational problems. An inclusive and trusted digital ID systems can strengthen the transparency, efficiency, and effectiveness of governance and the delivery of public services and programs[4]. This will also play a key role in the development of Kenyaโ€™s digital economy.

READ ALSO:   Advice on how a small scale milk farmer can do value addition.

One of the key problem farmers faced following outbreak of Covid-19 was the collapse of produce prices, due to a collapse in demand. This was exacerbated by the fact that farmers lack formal contracts with buyers, with most farmers produce bought by middle men and other traders. Producers of perishable produce, had their produce rot in farms due to lack of cold storage facilities.

Formalizing small holder farmers businesses is key to improving farmers resilience. Support should be provided to farmers organizations such as co-operatives, which can help organize farmers and solve difficulties that individual farmers face. Farmers organizations can provide various services to farmers such as aggregation of produce, cold chain storage facilities, negotiation with buyers for better prices and terms, credit, training etc. Farmers can also come together via co-operatives to add value to their produce helping members to move up the agriculture value chain. Most agricultural co-operatives collapsed due to mismanagement and other factors. Government should review laws and regulations governing farmers co-operatives to ensure they serve farmers interest and are accountable to farmers. Farmers organization can help formalize farming, grow farmers income and make farming more resilient to future shocks.

Providing affordable and tailored finance to farmers and entrepreneurs can improve their resilience to various business shocks. A survey of micro-entrepreneurs by the Central Bank of Kenya3 found that only 2% of respondents received support from banks and microfinance banks during Covid-19. This is indicative of problems with agriculture and MSE finance in Kenya. Farmers and MSEs have no access to finance to support them during periods of financial shocks. Farmers and MSEs indicated in various surveys that access to credit would have helped them recover from the adverse effects of Covid-19.

READ ALSO:   Africa climate negotiators to take a common position informed by science at the upcoming COP27

Government needs to put in place policy measures to support access to finance for ย ย MSEs and farmers. Banks are hesitant to advance loans to MSEs and the agricultural sector due to perceived high risk for the sector. Government can encourage lending to the sectors by working with commercial banks to implement credit guarantee schemes for the sectors to cover potential losses. Policy measures encouraging farmers to take up crop and animal insurance can reduce the credit risk associated with advancing loans to farmers.ย  The Agriculture Finance Corporation should also be reformed to a specialized institution lending to other financial institutions for onward lending to farmers.

Farmers and MSEs lack credit history, making it difficult for banks to assess their riskiness. Adopting digital/mobile payments can help farmers and MSEs built a credit profile improving access to credit. Farmers and MSEs can also be trained to keep simple records using digital tools which can support the business in various ways including access to credit. Providing financial literacy training to farmers and MSEs and encouraging them to save is also key to improving their resilience.

Farmers and other MSEs turned to digital tools following the outbreak of Covid-19, digital tools were used to connect directly with customers, disburse government support, access finance, purchase inputs, obtain information etc. Digital tools have the potential to increase efficiency and productivity. Despite, obvious benefits of adopting digital technologies their use remains limited due to various bottlenecks. ย Government needs to put up basic infrastructure to support e-commerce such as last mile roads, connections to the electric grind etc. Policy measures such as tax incentives to encourage investments in agriculture logistics should also be put in place. Farmers and entrepreneurs should be trained and encouraged to adopt digital technologies given the potential benefits associated with digital technologies. This could also go a long way in supporting the resilience of farmers and entrepreneurs.

READ ALSO:   City Markets, Where Brokers Dictate Prices & How We Got Here

MSEs including small holder farmers account for 98%[5] of all business in Kenya and are the largest source of employment. Covid-19 had far reaching consequences these firms. Given the importance of these sectors to the economy, policy and other measures needs to be put in place to improve their resilience.

[1] https://www.president.go.ke/2020/05/23/the-seventh-presidential-address-on-the-coronavirus-pandemic-the-8-point-economic-stimulus-programme-saturday-23rd-may-2020/

[2] Microsave Consulting, Impact of the COVID-19 pandemic on farmers, Kenya Report, October 2020

[3] Central Bank of Kenya, MSE Covid-19 Tracker Survey

[4] https://www.worldbank.org/en/news/immersive-story/2019/08/14/inclusive-and-trusted-digital-id-can-unlock-opportunities-for-the-worlds-most-vulnerable#

[5] Kenya National Bureau of Statistics, The 2016 National Micro, Small and Medium Establishment (MSME) Survey, October 2016.

How useful was this post?

Click on a star to rate it!

Average rating / 5. Vote count:

No votes so far! Be the first to rate this post.

As you found this post useful...

Follow us on social media!