Kenyan farmers are redefining how they finance agricultural activities as they increasingly turn to informal financing sources like customers, family, and digital lenders instead of traditional banks and Saccos. This shift reflects frustrations with high collateral requirements and complex application processes at formal institutions, leaving many growers reliant on more accessible credit channels to sustain operations and capture market opportunities, according to a recent Central Bank of Kenya (CBK) survey.

Why farmers are turning to informal and digital financing

A landmark CBK survey for November 2025 shows a marked pivot in borrowing behavior among Kenyan farmers. According to the survey, 18 percent of farmers reported taking loans directly from buyers of their produce — such as customers purchasing milk and coffee — up from virtually zero in September. At the same time, borrowing from friends and family surged to 25 percent from just six percent in the earlier survey period.

This trend comes as access to bank loans declined sharply. Only 30 percent of respondents said they had borrowed from commercial banks in November, down from 53 percent in September, while loans from Saccos also fell from 44 percent to 30 percent. Microfinance institutions experienced a similar contraction.

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Farmers’ move away from traditional lenders is driven by a range of factors. Many cite high collateral requirements, lengthy approval processes, and a perceived lack of understanding of agricultural lending needs among formal institutions. These challenges push growers toward quicker, more flexible financing options that do not require land or asset-based security.

Digital lending platforms are also playing a role, with 23 percent of farmers reporting use of digital credit in November compared with 13 percent previously, according to the latest reports. This highlights how technology is enabling faster access to funds, especially where conventional credit channels are seen as slow or restrictive.

Economic implications of the financing shift

The evolving credit landscape has significant implications for Kenya’s agricultural sector and broader economy. With only 37 percent of farmers reporting access to any form of credit in November — up modestly from 31 percent in September — many growers are still undercapitalized and unable to scale operations or invest in productivity-enhancing inputs.

Borrowing from customers and informal networks can provide short-term relief, but it may not offer the scale or duration of financing required for larger investments such as mechanization, irrigation, or expansion into new markets. This reliance on informal credit points to lingering gaps in agricultural financing that could hinder growth and innovation in the sector over the long term.

Nevertheless, the rise in digital lending could partially bridge these gaps. Platforms that offer quick credit approvals and flexible terms can empower farmers to access funds when they are most needed. However, digital loans also come with risks, including relatively high interest rates and short repayment windows, which may strain smallholder cash flows if not managed carefully.

From a policy perspective, addressing these financing bottlenecks could unlock significant productivity gains. Government-backed credit guarantee schemes and partnerships between financial institutions and agritech platforms could stimulate investment and reduce reliance on informal sources. Efforts to deepen agricultural credit markets and tailor products for smallholder needs may also encourage more farmers to engage with formal lenders.

For farm businesses, combining traditional loans with flexible digital options and community-based support networks could offer a diversified approach to funding. This hybrid strategy may help farmers navigate seasonal cash flow challenges while positioning them to invest in growth-oriented activities.

As Kenya’s agricultural sector continues to adapt, the shift toward informal and digital credit will likely persist unless formal credit channels become more responsive to the unique financing needs of farmers. Improving access to affordable and timely financing remains critical for strengthening food security, enhancing rural livelihoods, and driving broader economic development.