The African Development Bank Group (AfDB) is preparing to launch a $500 million facility to unlock $10 billion in financing for smallholder farmers and agribusinesses across Africa. AfDB President Dr. Akinwumi Adesina announced the plan during the High-Level Conference on Scaling Finance for Smallholder Farmers in Nairobi.
The Bank’s management is consulting with its Board of Directors to finalise the structure of the facility. The initiative aims to address financing challenges through trade credit guarantees, first-loss coverage, blended finance mechanisms, and origination incentives. It will also include technical assistance to lower transaction costs for small agribusiness enterprises.
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Bridging the agricultural financing gap
The initiative is being developed in response to Africa’s $75 billion annual financing gap for farmers and agricultural enterprises. The conference, held in partnership with the Pan African Farmers’ Organisation (PAFO), focused on mobilising resources to address this shortfall.
“We stand on the threshold of making history by pushing the boundaries of innovation and building extensive collaborative alliances to bridge the financing gap faced by smallholder farmers and agribusinesses,” said Adesina.
Adesina also called for global action to transform agriculture in Africa, saying, “Together, let us unleash the potential of agriculture in Africa. Let us make Africa the breadbasket of the world. And together, let us feed Africa with pride!”
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Progress since the Dakar 2 Feed Africa Summit
Adesina outlined the progress made since the 2023 Dakar 2 Feed Africa Summit, where 34 African heads of state committed to food security and sovereignty. Development partner commitments have grown from an initial $30 billion to $72 billion within a year. The African Development Bank pledged $10 billion towards these efforts.
The Bank has approved 77 projects valued at $3.9 billion across 32 countries to support the implementation of Country Food and Agriculture Delivery Compacts. An additional $1.72 billion in project approvals is planned for this year.
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Key initiatives supporting smallholder farmers
AfDB has introduced several initiatives to enhance smallholder farming:
- The Technologies for African Agricultural Transformation (TAAT) initiative has provided 25 million farmers with high-yield, climate-resilient crops, increasing food production by 120 million tonnes.
- The African Emergency Food Production Facility, a $1.5 billion programme, has distributed 459,000 tonnes of seed and 2.8 million tonnes of fertiliser to 12.3 million farmers, producing 37.6 million metric tonnes of food.
- The Special Agro-Industrial Processing Zones initiative has invested $934.51 million, with an additional $938.27 million in co-financing, supporting 27 projects in 11 countries.
- The Affirmative Finance Action for Women in Africa (AFAWA) programme has approved $2.52 billion in funding for 24,000 women-led businesses.
- The African Fertiliser Financing Mechanism has provided trade credit guarantees in nine countries, distributing 125,193 metric tonnes of fertiliser worth $62.8 million to 776,971 smallholder farmers.
- The Inputs Supplier Risk Sharing Programme, a $600 million initiative, is working to de-risk input supply chains in Uganda, Kenya, Tanzania, Ghana, and Zambia.
- The Mobilising Access to the Digital Economy (MADE) Alliance Africa, in partnership with Mastercard, has seen AfDB commit $300 million to integrate three million farmers in Kenya, Tanzania, and Nigeria into the digital economy.
Challenges in agricultural financing
Despite these efforts, only 6% of African smallholder farmers have access to credit, and fewer than 20% use improved seeds. Financial institutions often regard smallholder farmers as high-risk borrowers due to climate variability and lack of collateral. In many African countries, agricultural lending accounts for less than 5% of total bank loan portfolios, even though the sector plays a significant role in economic growth.
“For some of you, these numbers may sound familiar; for the rest of us, they should be frustrating to hear. We must act now to change this reality,” said Dr. Beth Dunford, Vice President for Agriculture, Human, and Social Development at AfDB.
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Call for bold action
PAFO President Ibrahima Coulibaly urged stakeholders to take decisive action, stating, “If we want to save our continent from hunger, malnutrition, and poverty, we must create jobs in the agricultural sector. There is no other sector capable of doing this.”
Kenyan Cabinet Secretary for Agriculture and Livestock Development, Senator Mutahi Kagwe, emphasised the importance of immediate implementation. “If we prioritise innovative, practical measures, we will transform agriculture into a thriving business. Let’s commit to ensuring that no farmers are left behind due to lack of finance.”
A panel of global and African financial experts reinforced the need to align financial structures with the needs of smallholder farmers. They stressed the role of governments in creating an enabling environment to expand agricultural lending.
As discussions continue, stakeholders are hopeful that the proposed $500 million facility will provide a significant boost to agricultural financing and drive sustainable food security in Africa.
