By Sharon Atieno
With smallholder farmers and small and medium-sized agribusinesses facing an annual financing gap of USD 75 billion, due to perceived higher risks and lower returns by commercial banks, Dr. Akinwumi Adesina, President of the African Development Bank Group has called for finding ways to expand their access to credit.
He was speaking at the High-Level Conference on “Scaling Finance for Smallholder Farmers” in Nairobi, Kenya’s capital. The meeting was convened by the Kenyan Ministry of Agriculture, the African Development Bank and the Panafrican Farmers Organization.
“We must find efficient ways to “de-risk” lending to farmers and small and medium enterprises. This can be achieved by absorbing incremental risk and thereby increasing lenders’ risk appetite and by leveraging outside private sector finance into the agricultural sector,” Dr. Adesina said.
He noted that the Bank had deployed this approach and it has worked successfully in several projects including in the African Fertilizer Financing Mechanism where trade credit guarantee projects were implemented in nine countries. These are Tanzania, Nigeria, Ghana, Côte d’Ivoire, Zimbabwe, Kenya, Uganda and Mozambique.
The $17.1 million trade credit guarantee was leveraged by 4.7 times, including 13 times leverage in Tanzania. It has enabled the distribution of 125,193 metric tons of fertilizer worth $62.8 million, which benefitted 776,971 smallholder farmers during the 2019 – 2024 seasons.
Further, it has facilitated access to finance for over 126 hub agro-based enterprises involved in fertilizer distribution with women beneficiaries representing 36% of the African Fertilizer Financing Mechanism projects.
According to Dr. Adesina, there is need for innovation and building extensive collaborative alliances to accelerate action towards bridging the financing gap facing smallholder farmers and small and medium-sized agribusinesses.
Since the Dakar 2 Feed Africa Summit in 2023, he said the Bank has made tremendous progress in its combined continental quest to Feed Africa, approving 77 operations valued at $3.9 billion to support the implementation of Compacts in 32 countries.
Central to the Compacts is the Bank’s flagship initiative, the Technologies for African Agricultural Transformation (TAAT) which aims to double food production by providing proven technologies to more than 40 million smallholder farmers by 2025.
The TAAT platform has delivered heat-tolerant wheat varieties, drought-tolerant maize varieties, and high-yield rice varieties, as well as capacity building, training and other related services to 25 million farmers across the continent.
“Our efforts with partners have increased Africa’s crop production by an estimated 120 million tonnes of additional food. A total of $1.7 billion in investments has been influenced by TAAT’s climate-smart technologies – and about 247 million Africans have better nutrition today, due to TAAT,” Dr. Adesina noted.
He noted that for 2025, the Bank plans to approve an additional $1.72 billion in project investments and policy-based operations.
Additionally, there are ongoing talks with the Board of Directors of the African Development Bank to establish a $500 million facility to unlock $10 Billion of financing for smallholder farmers, as well as small and medium-sized agribusiness enterprises.
This will include the use of trade credit guarantees, first loss coverage, blended finance, and origination incentives that defray the high transaction costs of serving enterprises, as well as technical assistance.
“Together, let us expand access to finance at scale for farmers and small and medium-sized agribusinesses. Together, let us provide strong policy support for farmers. Africa must never abandon its farmers,” Dr. Adesina urged.
