Lenders are looking beyond land and buildings when deciding who gets a loan. Agribusiness firms in Kenya are now being told to show documented sales, invoices and payment histories instead, Capital FM reported on Saturday. The shift could ease access to working capital along the agricultural value chain.
Agriculture accounts for an estimated 3.2 to 3.6 percent of total bank lending, according to Avenews Kenya. That is small next to the sector's role in the economy. The gap hits businesses that move produce from farms to consumers. Without formal credit, they struggle to buy produce, pay suppliers and expand distribution.
Avenews Head of Credit Joan Wanja said lenders can judge these firms by their verified transactions, accepted invoices and bank or mobile money statements. They need not rely only on the assets a business owns. "An accepted invoice from a reliable buyer is a good example. It is a payment already earned, waiting to arrive," Wanja said.
Under invoice financing, eligible suppliers can receive up to 85 percent of an approved invoice's value before the buyer pays. The money keeps the business running between delivery and payment. The model comes with conditions. The buyer must be reliable, delivery must be confirmed and the supplier must be able to repay on time. Wanja said lenders also check how steady a firm's transactions are, how long it waits to get paid and whether it has enough cash to survive late payments.
Pressure on traders' cash is building. Higher grain and milk prices mean traders need more money just to keep buying the same volumes. Wanja warned businesses against borrowing to cover losses. Credit should fill short cash flow gaps, not prop up loss-making trades. "Borrow to bridge a timing gap, never to cover a loss," she said.
Avenews says 84 percent of its loans go to returning customers. The company credits this to financing built around the trading cycles of agricultural businesses. Capital FM noted that repeat borrowing alone does not prove a loan is affordable or sustainable. That is especially true for firms exposed to volatile commodity prices, late buyer payments and shifting demand.
The shift comes as digital lending changes, with regulators putting more weight on responsible lending and consumer protection. Before taking a loan, businesses are advised to establish the total cost in shillings, the repayment dates and the penalties.