By Frank Okello
Flexible terms, blended capital and local partnerships are crucial for financial systems to better support smallholder farmers.
Experts said during a high-level webinar on “Unlocking Agri-Finance: De-risking Investment for Climate-Smart Agriculture in East Africa.”
Lydia Njeri, Impact Finance Manager with the Rabo Foundation, highlighted the differences between commercial and impact lending. She explained that while commercial loans often carry high interest rates and strict collateral requirements, impact lending provides more flexible terms. These include lower interest rates, longer grace periods, and in some cases, blended financing that combines grants and loans. This enables Agro-SMEs, Agro-Processors, and ultimately farmers to operate sustainably.
According to Njeri, the Rabo Foundation does not lend directly to smallholder farmers but instead partners with Agro-SMEs that already have close relationships with farmers. “We focus on Agro-SMEs with ambitions to be impactful, sustainable, environmentally friendly, and socially uplifting,” she said. The foundation supports such enterprises with affordable financing structures, mentorship, and knowledge-sharing.
Njeri clarified that this model is based on operational limits. “We only have five impact finance managers across seven countries. By working through Agro-SMEs, we reach more farmers efficiently,” she explained.
From a government perspective, Roy Odongo, Director of Climate Change in Homa Bay County, noted that the Financing Locally-Led Climate Action (FLLoCA) program is a flagship tool for county climate finance. FLLoCA, supported by the World Bank and bilateral partners such as Denmark, Sweden, the Netherlands, and Germany’s development bank, channels grants to counties to strengthen climate action.
The program includes two components: the County Employment Support Institutional Grant, which builds policy and institutional frameworks, and the County Climate Resilient Investment Grant, which funds projects in agriculture, water, environment, forestry, and disaster risk reduction. Odongo noted that disbursements for the financial year (FY) 2022/2023 and FY2024/2025 have already supported training and capacity building across counties.
However, he raised concerns about limitations. “The grants currently target public benefit projects only. There is a need for FLLoCA to also support private enterprises to enhance inclusivity and scale,” Odongo said.
Charles Nyadero, Investment Manager, Kenya Climate Ventures, underscored the role of catalytic capital in de-risking agricultural investment. He identified four qualities essential for such capital: patience with longer investment horizons, lower interest rates compared to commercial markets, greater tolerance for risk, and collaboration among philanthropic, development finance, and commercial actors.
Nyadero stressed agriculture’s centrality to sustainable development. “Agriculture must work if we are to achieve the Sustainable Development Goals by 2030. At least seven of the 17 SDGs are directly tied to agriculture,” he said.
Panelists agreed that many agricultural value chains require patience and long-term support to become investment-ready. Quick-return financing models, they said, undermine sustainability.
Key recommendations included scaling up blended financing tools, supporting Agro-SMEs as the main link to farmers, broadening grant programs like FLLoCA to include private sector participation, and ensuring finance is paired with mentorship and technical assistance.
The webinar closed with a consensus that sustainable agribusiness in East Africa requires partnerships at every level. With climate risks rising, participants emphasized that financing models must strike a balance between profitability and resilience, ensuring farmers and local communities are not left behind.
