CENTRAL BANK OF KENYA
REMARKS
BY
PROF. NJUGUNA NDUNG’U
GOVERNOR
CENTRAL BANK OF KENYA
AT
A ONE DAY INTERACTIVE FORUM ON
‘GROWING AGRICULTURE THROUGH FINANCE’
Kenya School of Monetary Studies
17th March 2010
Deputy Prime Minister & Minister for Finance, Hon. Uhuru
Kenyatta;

Minister for Agriculture, Hon. William Ruto;
US Government Representative – Deputy Chief of Mission, Mr. Lee
A Brudvig;
CEOs of Commercial Banks Present;
Resource Persons;
Distinguished Participants;
Ladies and Gentlemen:
It gives me great pleasure to be with you this morning, and to welcome you all
as we deliberate and exchange views on this crucial matter of growing
Agriculture through Finance.
The Agricultural sector is the livelihood of many in Kenya. The sector
contributes directly about 24% of GDP, 65% of the country’s export
earnings and employs about 80% of Kenya’s labour force, directly and
indirectly. But more important, food security is the most critical and cuts
across all other developmental objectives. The policy paradigm that supports
this sector is indeed the cornerstone of our development blueprint.
It is tempting to say that financing Agriculture will rely on the financial sector
in totality. The subject is broader than this and this is what we want to
generate via dialogue this morning.
But what is not in doubt in financing Agriculture is the presence of long-term
funds as well as appropriate avenues to develop crop insurance.
Small-holder farmers have done well in increasing quality production and
adoption of high yielding varieties, but have done poorly where they are not
supported by cooperatives to market and create buffers for them. That is, they
have been failed by lack of supporting agricultural infrastructure.
A policy to support Agricultural infrastructure should focus on:
• Financing production – crop insurance/crop finance
• Financing processing

• Investing in storage
• Investing in distribution and marketing networks
• Complemented with an appropriate credit policy
In this way, the farmer can participate in the market fully. This is what will
ensure food security and stability of domestic prices – food is now accounting
for 36% of the Consumer Price Index (CPI) basket – an important tool to fight
national inflation. To that extent, increased agricultural productivity,
particularly in food helps reduce food inflationary pressure that also feeds to
the national inflation. In addition, GDP growth in this country is determined
by growth in this sector.
From the Central Bank side, our support in this initiative is important. The
Central Bank of Kenya through its capacity building arm – the Kenya School
of Monetary Studies (KSMS) intends to develop a certified agricultural
finance program in collaboration with COMPETE – USAID. This program
will be suitable for agricultural officers as well as credit officers. This is
important in developing the critical mass of human capital that fully
understands agribusiness, such as agribusiness cycles, risk management
practices, farm cash-flows and finance and insurance. This will support
farmers and also develop a strong drive to lift the policy paradigm in this area.
But the wider scope of monetary policy support is not in doubt.
Finally, Distinguished Guests, Ladies and Gentlemen, I would like to conclude
my brief remarks by wishing all of you fruitful deliberations this morning.
Thank you very much for your kind attention.