Loans farmers can take to boost production

Farming loans in Kenya:There is no doubt that agriculture is the backbone of the Kenyan economy. But profits in the agriculture sector, and especially in crop farming do not just happen.

They require heavy capital investments. often times, many crop farmers fall short of raising the requisite capital that is necessary in the multiplication of their produce. Today, though, there are financial solutions that crop farmers can take to ensure that capital does not hold them back from realizing their farming dreams.

For example, the Co-operative Bank has designed two different types of loans tailored for crop farmers in the country.

The two include:

1). The Nafaka loan for the large scale farmers.

2). The Nafaka loan for small scale farmers.

Interestingly, both loans are charged at the current low rates of 14 per cent.

Below is the full break down of the loans’ features:

1). Nafaka Large Scale:

  • Maximum debt ratio of 50% of gross margin.
  • Proof of viable market or existence of a warehouse receipt arrangement for products whose inputs are to be funded.
  • Minimum earnings and positive cash flows from farming of grains of 2 years or 4 seasons.
  • Borrower must be the owner of or lease of land used for production of the grain. Lease tenure should be more than tenure of loan by at least one year
  • Borrower must demonstrate ability and willingness to take life insurance and assign it to the bank for a sum insured not less than the loan amount.
  • Borrower must demonstrate ability to meet other costs of producing
  • Borrower must be willing to open and operate account with co-operative bank for disbursement/ remittance of proceeds and debt servicing.
  • Borrower must provide the following minimum documents for determination of repayment ability
  • Land size should be greater than 5Ha.


  1. Amounts up to Kshs.10,000,000, bank accounts statements, production and earnings trend analysis and cash flow forecasts
  2. Amounts exceeding Kshs.10, 000,000- audited accounts or statement of affairs + income and expenditure statements, production and earnings trend analysis, bank account statements and cash flow forecast.


  • Loan Amount: from Kshs. 300,000 to 15,000,000
  • Interest rate: Base + 1% p.a.
  • Application fees of 1% of loan amount
  • Appraisal fees of 1% of loan amount
  • Maximum tenor of 12 months

2). Nafaka Small Scale

  • Individual must be a farmer engaged in viable production of maize, wheat, barley, rice, sorghum and millet on a small scale.
  • Must be residents, should be the owners of land used for production and for leased land it should be two (2) years prior to expiry.
  • At least 12 months in operation (2 seasons of grain production), with positive net cash flows.
  • Must be willing to open and operate account with Co-operative Bank for channeling the disbursement and repayments
  • Maximum debt ratio of 50% of Gross income (income from farm, employment or other businesses as evidenced by bank account turnovers and farm gross margin analysis).
  • Must have life insurance on the life of borrower (sum assured pegged on the loan amount).
  • Land size should be between 1 Ha & 5Ha

Other features

  • Loan Amount: from Kshs.20,000 to 300,000
  • Interest rate: base +1 %
  • Application fees of 1% of amount requested, minimum Kshs 500
  • Appraisal fees of 1% of amount requested, minimum Kshs 1000
  • Maximum tenor of 12 months.
  • Security should be chattels whose forced sale covers minimum 150% of loan.
  • Insurance over death and disability with minimum sum assured of loan amount with the banks interest noted.
  • Irrevocable instruction to the buyer to channel all proceeds through the bank and/or proof of market e.g. positive cash flow.
  • Disbursement must be direct to the input supplier.

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