Recent Central Bank of Kenya (CBK) survey reveals that farmers are increasingly abandoning the government’s much-touted Hustler Fund and microfinance institutions in favor of commercial banks and digital lending platforms like Fuliza and KCB M-Pesa. This change in borrowing habits, observed between March and May 2025, signals a growing preference for more accessible and flexible credit options.
The CBK’s “Agriculture Sector Survey” highlights a clear decline in the use of the Hustler Fund and microfinance institutions by farmers. In March, 11% of surveyed farmers utilized the Hustler Fund, and 13% relied on microfinance lenders. However, by May, these figures plummeted to zero, indicating a complete cessation of borrowing from these sources among the surveyed group. The trend raises questions about the long-term impact and effectiveness of the Hustler Fund, which was designed to provide affordable financing to low-income Kenyans.
Conversely, commercial banks have emerged as the preferred credit source for farmers, with borrowing from these institutions increasing from 41% in March to a dominant 58% by May. Digital loan uptake also saw a notable increase, rising from 2% to 8% over the same period, with platforms like Fuliza and KCB M-Pesa gaining significant traction. This shift is partly attributed to banks lowering lending rates in response to monetary policy easing, making their credit more attractive to the agricultural sector. “The shift comes as banks lower lending rates in response to monetary policy easing, making credit more attractive to borrowers in the agricultural sector,” the CBK survey noted.
The survey also revealed changes in how farmers utilize credit. While the majority still use loans for farm inputs, this percentage dropped from 94% in March to 84% in May. Similarly, credit for labor declined from 62% to 57%. Interestingly, there was a significant increase in the use of credit for machinery and equipment, rising from 25% in March to 41% in May, suggesting a move towards longer-term investments.
Despite the growing popularity of commercial and digital loans, access to credit remains a challenge for many farmers. High interest rates were cited as the leading constraint by 54% of farmers in May, up from 38% in March, though this figure is slightly lower than the 58% recorded in November 2024. The proportion of farmers citing lack of collateral as a barrier remained stable between 20% and 30%.
The Hustler Fund, launched in 2022 with an 8% annual interest rate, aimed to support small businesses and farmers. However, it has faced criticism for high default rates and governance issues. Reports indicate that 13 million Kenyans owe Ksh7 billion to the fund. A report by the Kenya Human Rights Commission (KHRC) even termed the Hustler Fund a “debt trap,” stating it failed to deliver economic transformation. Furthermore, recent data suggests that a significant proportion of Hustler Fund users are from middle and higher-income households, contradicting its original goal of supporting low-income earners.
The Central Bank of Kenya’s latest data shows that the average commercial banks’ lending rate fell to 15.29% in June 2025. While some banks like Citibank offer rates as low as 10.60%, others, such as Credit Bank and Access Bank, have rates nearing 20%. This disparity in lending rates across commercial banks may also influence farmers’ choices, pushing them towards institutions offering more favorable terms for their specific needs.
Farmers are actively seeking out financial solutions that best meet their immediate and long-term needs, often prioritizing accessibility and flexibility over state-backed initiatives.
