The presentation shows how Kenya can increase her attractiveness to private investors through policy change, infrastructure support and climate resilience action in order to unlock potential for smallholder farming.

1. “Every $1 of PSW Funding leverages $8
of private sector funding”-GAFSP
Ray of agro-hope: How Kenya can leverage on the Private Sector Window facility to
unlock the productivity potential of small holder farmers
DRM in Kenya improved significantly over the last 10 years, mainly due to improved tax
administration using technology and widening the tax net to include tax on rental income.
Budget has gone into the trillions. Infrastructure partly financed by, Domestic resources,
MDBs and government-government financing, mainly China has significantly shot up.
What is the problem or issue that you are trying to solve? However, there are still plenty
of gaps and numerous opportunities for investment in the agricultural sector. Given that
over 75% of the world’s poor live in rural areas in small plots of land, and then there is need
to invest towards making their small holder farmers activities more commercially viable and
competitive as a basic step to poverty eradication. One way is attract the level of financing
necessary to provide farm inputs, technical support as well as to build markets systems.
Ideally, a blend of finance mechanisms will be required to meet this huge finance deficit.
For example, Official
development assistance
(ODA) could, through
leverage and catalytic support, help mobilize substantially more private capital (Kharas and
McArthur, 2014) which is estimated at trillions of dollars.
Small holder farmers in Kenya face serious constraints that lock them out of the formal
agribusiness market, making them far less-competitive than the more resource-endowed,
large scale commercial farmers. Kharas and McArthur (2014) bet on the agricultural sector as
one of the high-impact investment categories where private investment can create massive
impact.

2. Current public financing of the agricultural sector is not enough to unlock the massive
potential in agricultural productivity. Besides, inefficiencies in public finance such as illicit
flows make the situation worse. Some of the problems that need to be urgently addressed to
increase agricultural productivity include improving access to finance and farm inputs,
adoption of smart modern farming technologies, enhancing access to technical support, and
enhancing climate change resilience.
Stakeholder Incentives to participate
a. For government:
Unlocking agricultural productivity of small holder farmers will be beneficial to the
economy, the GDP will grow, food security will increase, and the government will increase
her revenue from taxes levied along the agriculture value chains. Improving good
governance, itself a key aspect of attracting investment is a requirement for democratic
institutions and the rule of law, a concept which is associated with visionary political
leadership. Lastly, the government is a key stakeholder in implementation of the SDGs
b. For Private Sector
Diversify portfolio into an emerging high-impact areas and generate profits for investors,
and partnerships in implementation of the SDGs. Besides, the private sector is able to
facilitate innovation and new technology adaption much faster than the public sector
c. For Official Aid Provider:
Official aid providers such as the GAFSP cherish partnerships that will lead to positive
outcomes in small holder agriculture productivity, with the ultimate goal of enhancing food
security (SDG Number 2). Partnerships for implementation of the SDGs. Support to small

3. holder farmers is directly linked with at least 6 of the SGDs namely – no poverty; reduced
inequalities, zero hunger, climate action, life on land, good health and well-being, etc.
Figure 1: The Post 2015 Sustainable Development Goals
(Source:
http://www.undp.org/content/dam/undp/library/corporate/brochure/SDGs_Boo
klet_Web_En.pdf)
.
The main obstacles currently standing in the way of unlocking private financial opportunities
in small holder agriculture

4.  Poor regulatory framework and weak institutional governance structures that increase
risk to private finance for small holder agricultural productivity development. This
has led to lack of social accountability in public finance (e.g., adverse ranking in the
Transparency International corruption Index-
http://www.transparency.org/cpi2016) and relatively poor scores in the World Bank
ease of doing business index.
 Infrastructure challenges that increase inefficiencies along the agricultural supply
chain, e.g. Post-harvest loss due to lack of grain drying and storage facilities,
 Lack of innovation along the value chains of small holder agriculture and weak
capacity/ technical knowledge makes them much less competitive in the market
 Access to finance for farm input, which seriously constrains the productivity potential
of smallholder farmers
Proposed Theory of Change for Leveraging on the PSW to unlock private Financing
for small holder agriculture productivity in Kenya
The current GASPF investment commitment in Kenya stands at $24 million. The financial
project- Small-Scale Irrigation and Value Addition Project (SIVAP) aims to increase
agricultural productivity for traditional high value crops and small livestock, to enhance
market access and trade opportunities; and to significantly build the capacity of these farmers
to engage in future sustainable agricultural ventures, which in an important factor for scale
up.

5. Government Inputs: Outputs Outcome
Institutional reforms:
 Rule of law
 Social accountability
 Enhance role of Research
institutions, e.g. KALRO
 Agricultural policy reforms
 Align economic policies to
agriculture
 Fiscal policy, e.g. -New risk
bearing instruments
Infrastructure Development:
 Strengthen DRM
 Undertake PPP (public-private
partnerships) to finance
feasible infrastructure projects
 Post-harvest facilities
Climate Action/ Resilience:
 Promote use of green energy
 Reforms/ laws on climate
resilience
 Smart technologies
 Water harvesting and
conservation
Improved investment
climate
(Indicators: World Bank
Ease of doing Business, TI
Corruption index)
Increased Agriculture-
supportive infrastructure-
(Indicators: No of roads,
grain facilities, etc.; Expected
ROI)
Improved climate resilience
scores
-Action aligned to climate
objectives of the SDGs for
environmental sustainability
EnhancedaccesstoPSDWfunds,whichwillinturnleverageofmore
privatesectorinvestmentinsmallholderagriculturalproductivity

6. Official development assistance (ODA) could, through leverage and catalytic support, help
mobilize substantially more private capital (Kharas and McArthur, 2014). The proposed
solutions is to thus attract ODA in the agricultural sector mainly the private sector window
to leverage of private investment, by promoting governance systems, and a supportive
regulatory and infrastructure environment to enhance the impact of PSD funds for the
agricultural sector (GAFSP, 2014). {More information available at
http://www.gafspfund.org/content/kenya}.

7. References
Homi Kharas and John McArthur. (Jul 2014). Mobilizing private investment for post-2015
sustainable development, Brookings Institute, Briefing note. Available at
https://www.brookings.edu/research/mobilizing-private-investment-for-post-2015-
sustainable-development/
How creating new markets can change the future of development finance, By Philippe Le
Houerou, Executive Vice-President, International Finance Corporation, Op-Ed Jan.
2017
The Global Agriculture and Food Security Program (GAFSP).[2014]. Changing lives- Private
sector solutions for helping small farmers. Available at
http://viewer.zmags.com/publication/2eaedaa9#/2eaedaa9/1