AFEX Launches USD 1M Agricultural Financing Program

AFEX, Nigeria's leading commodities market player, has crossed borders to establish a presence in Kenya, the largest and most diverse economy in East Africa. It works closely with smallholder farmers to increase yields and productivity while also strengthening market links.

The commodities exchange company's expansion comes after it issued a US$100 million 10-year bond dubbed The Food Security Fund (FSF) late last year. Aside from financing 250,000 hectares of land for commercial and smallholder farming in Nigeria, the blended financing aims to expand to Ghana, Côte d'Ivoire, Kenya, Rwanda, Uganda, Tanzania, Benin, Togo, Tanzania, Ethiopia, and Zambia over the next ten years.

Following a successful pilot phase in the fourth quarter of 2021, AFEX decided to make its first stop in Kenya. At the time, maize was the main commodity traded. According to the company, it has already achieved significant results, with over 4,000 metric tonnes of commodities traded and an estimated 7,100 people served by AFEX's eight warehouses currently operating in the country.

The pilot phase also highlighted a number of challenges faced by local producers in Uasin Gishu County, in Kenya's North Rift region, such as access to affordable storage facilities, which resulted in many farmers storing their crops at home. 

Furthermore, despite high levels of mechanization and relatively large land holdings, producers are cut off from opportunities to sell their produce, often relying on middlemen. "We've been hugely encouraged by what we've seen since our pilot phase began, with thousands more farmers experiencing increased productivity, value capture, and access to structured commodity trading mechanisms in Kenya."

"With our experience assisting farmers in gaining direct market access, we're uniquely positioned to assist Kenyan farmers in contributing to national food security while ensuring sustainable development for future generations," said Ayodeji Balogun, CEO of AFEX.

AFEX's entry into Kenya is timely; as of November 2021, analysts estimated that 7.9 million Kenyans lacked sufficient food for consumption, accounting for 15.4 percent of the country's population.

AFEX Fair Trade Limited (AFTL) has launched a US$1 million loan programme as part of the expansion to provide farmers with access to seed and fertilizer for their crops, thereby mitigating rising commodity prices. Under the programme, 5000 Kenyan farmers will be able to access timely inputs and gradually scale their businesses by taking out input loans.

AFEX is bringing its depth of experience, as well as unique storage and distribution solutions, to Kenya, with the goal of trading over 500,000 metric tonnes of agricultural commodities by 2025.

In the coming months, rice, sorghum, and coffee will be added to the exchange. "This is one of the world's most dynamic commodity markets, and we are excited to work with Kenyan farmers to help them scale their operations," Ayodeji said.

AFEX has appointed Tabitha Njuguna as Managing Director to spearhead growth in the new market. She currently leads a team of 14 people.

"The technology that powers our operations is among the best on the continent, and it is critical to our ability to provide access to logistics delivery, advisory services, inputs, and, most importantly, market access, all of which are critical to the future of agriculture in Africa."

"We want to remove one of the most significant barriers to farmers expanding their businesses: access to finance." So far, we're delighted to have enabled 70% of the 5,000 Kenyan farmers who approached AFEX for input loans, and we're committed to empowering many more farmers in the coming months," Tabitha said.

AFEX anticipates strong growth and significant measurable impact in Kenya's relatively more developed agricultural sector, having built itself from the ground up in an agricultural sector widely perceived as difficult for businesses to operate in.