AFC opposes loan write off

July 16, 2008
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, NAIROBI, July 16 – The Agricultural Finance Corporation (AFC) is raising strong objections to proposals for the cancellation of a Sh4 billion debt owed to it by farmers.

AFC Managing Director Omurembe Iyadi said Wednesday that writing-off the debts would damage the organisation\’s credibility as a lending institution.

Iyadi instead proposed that the government offer subsidies to farmers as they continue to service their loans.

The money is owed to AFC by farmers who had been taking loans. Some Members of Parliament had proposed that the debts be written off, to assist farmers in ongoing agriculture recovery efforts following the effects of post-election violence.

“To have AFC write off loans would send the wrong signal; it perpetuates perception that AFC is here as a charitable organisation,” Iyadi explained. “It is time that the government changed its approach so that AFC is perceived correctly as a financial institution.”

Iyadi further said that the agricultural sector needed at least Sh10 billion to help farmers recover from losses incurred during the violence.

He said the funds would be used to assist farmers to plant on a large scale thus averting possibilities of a food shortage.

The AFC boss said the funds would be in addition to a government pledge of injecting between Sh5 billion to Sh10 billion to revamp the financial institution.

“The government knows very well what is going on (and) it is addressing the issue. If farmers do not plant enough acreage of the main food crops like maize and wheat, it just means that we have to import,” he said.

The government intends to move a motion in Parliament seeking to introduce a fund to cushion farmers against price fluctuations in the event of over production or unfavourable weather conditions.

The Agriculture Development Fund would offer subsidies to farmers if the market prices fall beyond expectation.

According to Agriculture Minister William Ruto, 4.5 percent of the national budget would be channelled to developing agriculture in the country.

Ruto had also assured farmers that the government would continue to initiate measures aimed at bringing production costs down, and appealed to the private sector to assist in the endeavor.

The Minister had also announced that the ministry has set aside Sh70 million for assisting the ASK rehabilitate all the showgrounds that had hosted IDPs.

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