Kenya: Co-op, Mastercard to provide small farmers loans below market rates

Mastercard and Co-operative Bank of Kenya have unveiled a partnership that aims to provide loans to smallholder farmers at interest rates lower than the prevailing market rates.

More than 70 percent of agricultural production in Kenya is attributed to small-scale farmers.

However, these farmers encounter difficulties in obtaining credit from traditional financial institutions.

This collaboration is just one of three anticipated partnerships poised to bring about substantial advancements in digital and financial inclusion for smallholder farmers and rural communities across East Africa.

According to Mastercard Community Pass Founder, Tara Nathan, the collaboration jointly with Shell Foundation and Co-operative Bank of Kenya, will provide below-market interest rates to smallholder farmers against lending for green technology.

“We are excited about coming together to showcase our shared dedication to enhancing digital and financial access, with a focus on addressing the specific needs of our users,” said Nathan.

Traditional lenders face considerable challenges in extending credit to smallholders. They grapple with factors such as fluctuating central bank interest rates, weather-related risks, and the elevated costs associated with administering loans on a small scale.

With this solution, Mastercard empowers rural and marginalized communities, often lacking digitized data records, identification documentation, and connectivity, to access a network of offline services digitally.

The platform provides a commercially sustainable approach to scaling service delivery and increasing access to critical services including agriculture, healthcare, and micro-commerce.

Community Pass is growing and has already reached nearly five million users globally in Uganda, Kenya, Tanzania, Ethiopia, and India.

Vice President for Sub-Saharan Africa at Mastercard, Daniel Huba emphasized the significance of enhancing farmers’ access to finance as a critical factor for boosting agricultural productivity, alleviating poverty, and fostering sustainable development in Kenya.

By linking smallholder farmers to banks and other financial institutions, these initiatives can help farmers access credit, purchase agricultural inputs, and improve their yields.

The announcement builds upon a previous collaboration between the two entities, involving the development of an online platform. This platform facilitates timely access to farm inputs for local farmers, ensuring they receive the necessary resources at the beginning of the planting season.

Since its inception, the Co-op Bank Soko platform has witnessed substantial participation, and the collaboration between the two entities has made a significant impact on the development of the agricultural industry in Kenya.