KPMG warns high borrowing costs threaten farm productivity

Cheaper fertiliser is easing the burden on farmers, but high borrowing costs and limited access to credit continue to hold back production.

For farmers, the cost of a harvest comes long before the income. Fertiliser, seed and labour must be paid for upfront, while earnings depend on what survives the season and the price it fetches.

KPMG’s latest report on global food system resilience warns that this balance is becoming harder to sustain. It links rising fertiliser costs to disruptions in global oil and gas markets, which affect the cost of producing and transporting the input.

With margins squeezed and credit difficult to secure, farmers are cutting back on inputs and postponing spending on equipment, maintenance and new technology. Those savings today, the report warns, could weaken productivity in seasons to come.

Here in Kenya, the Ministry of Agriculture identifies similar financing barriers. Its agricultural investment plan for 2026 to 2030 cites high interest rates, strict collateral requirements and lending periods too short to meet farmers’ needs.

Private funding, it says, tends to favour established export businesses, leaving smallholders and smaller agricultural enterprises struggling to attract investment.

The government has sought to ease part of that burden through input subsidies. In August, Agriculture Cabinet Secretary Mutahi Kagwe announced a further reduction in the price of subsidised fertiliser, from Ksh.2,500 to Ksh.2,000 for a 50-kilogramme bag. The government also moved to halve the cost of certified maize seed, from Ksh.300 to Ksh.150 per kilogramme.

But even as the government works to lower input costs, KPMG warns that uncertain weather, prices and returns have kept lenders cautious, leaving farmers with cheaper inputs but limited means to pay for them.