Bill seeks to create fund to secure 20 per cent minimum returns for Kenyan farmers

Farmers in Kenya could soon be assured of a minimum profit of 20 per cent above their production costs if a new Bill currently before Parliament is passed to become law.

The Agriculture Produce (Minimum Guaranteed Returns) Bill, 2024, aims to establish the Agriculture Produce Minimum Guaranteed Returns Fund to help secure stable incomes for farmers.

The bill, sponsored by Nominated Senator Veronica Maina, proposes that farmers receive guaranteed returns on their agricultural produce to cushion them from market uncertainties.

“The agriculture sector contributes more than 20 per cent to the gross domestic product (GDP), 60 per cent of total export earnings, and about 45 per cent of government revenue,” Maina said, highlighting the sector’s importance.

She added that the industry is responsible for meeting much of the country’s food needs.

Under the proposed law, the guaranteed minimum returns would be set at 20 per cent of the profit above the comprehensive cost of production.

Changing market prices

The “comprehensive cost” would include expenses on farm inputs like seeds, herbicides, pesticides, fertilisers, livestock feeds, labour, fuel, irrigation, and other related costs, as determined by the Kenya National Bureau of Statistics.

Maina emphasised that the committee would periodically review the returns to reflect changing market prices.

The Bill specifies that minimum returns would apply only to agricultural produce largely consumed locally. In cases where market returns fall below the recommended minimum, farmers would receive direct transfers to their bank accounts to bridge the gap.

Maina noted that the agricultural sector faces numerous challenges, including limited access to finance and market instability, which undermine farmers’ livelihoods.

“This fund, if passed, would help cushion farmers from such uncertainties and ensure they have a steady income,” she said.

The Bill proposes that each county set up its own Agriculture Produce Minimum Guaranteed Returns Fund, managed by a committee comprising the county’s chief officers in charge of agriculture, finance, and trade. The committee would also include representatives from both registered and unregistered agricultural producer associations.

The committee’s responsibilities would include determining eligible crops and livestock for guaranteed returns, reviewing market conditions, and approving the disbursement of funds.

The committee would also be tasked with investing any surplus funds, with the approval of the county treasury, and collaborating with relevant bodies to further the fund’s objectives.

At the start of each financial year, the committee would be required to publish and publicise the minimum guaranteed returns in the Kenya Gazette and make adjustments as necessary based on market conditions.

“The goal is to ensure that farmers have consistent and secure incomes to promote the growth and development of the agricultural sector,” Maina said.

The bill is now under consideration in the Senate, with the potential to significantly improve the financial stability of farmers across the country.