India offers Kenya a US$250m credit line to boost agriculture

Photo credit: Mahindra 

India has announced a US$250m line of credit to Kenya for agricultural mechanisation projects. This line of credit is expected to be routed through the India EXIM bank, which has also announced plans to set up its East African regional headquarters in Nairobi. The deal was announced during the state visit of Kenyan President William Ruto to India in November.

Although the use of machinery like tractors, planters, harvesters, and irrigation systems has significantly increased in Kenya over the past decade, it remains insufficient, contributing to Kenya achieving only 25% of its potential farming yields. Limited financing options and high interest rates have been cited as key barriers. The US$250m line of credit offered by India will make it easier for Kenyan importers to buy agricultural goods from India. India typically offers its trading partners in the developing world lines of credit to encourage them to contract Indian firms and buy Indian. In 2021, the India EXIM Bank extended US$2.23 billion in lines of credit to foreign governments. It also offers its own firms – public as well as private – liberal credit guarantees to encourage them to a trade and invest across Africa.

Ruto has offered land to Indian agribusiness firms to cultivate of crops such as millet. The Government of India, in turn, has agreed to encourage its companies to invest in the sector, including in the areas of equipment and technology. Indian tractor brands such as Sonalika and Farmtrac are already available in Kenya.

Kenya is home to a large number of entrepreneurs of Indian origin who have made significant contribution to creating a vibrant agro-processing and manufacturing sector. Some of the most renowned names include hygiene product-makers Chandaria Group, edible oil-to-soft-drink maker Bidco; steel, aluminium and cement manufacturer – Devki Group; and tea, coffee, and nuts processor Sameer Group.

In 2022, Kenyan exports to India were valued at US$123m, with coffee and tea being the primary commodities, totalling US$41m. Other significant agricultural exports from Kenya to India included dried legumes, valued at US$6.6m. On the other hand, India exported goods worth US$2.9bn to Kenya, including petroleum products (US$752m), pharmaceuticals (US$317m), and industrial machinery (US$254m). Indian Prime Minister Narendra Modi and President Ruto agreed to enhance bilateral trade and investment by resolving market access issues. India has joined China in opening its market further to African agricultural produce. In September, Kenya dispatched its first consignment of fresh avocados to India.

 

References

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