Enhancing smallholder farmer financing in Africa

Speaking at a two-day conference, leading global and financial experts underscored the crucial role of government intervention in creating an enabling environment for financial institutions to expand agricultural lending

The conference represents a pivotal step in mobilising the billions needed annually to support Africa’s smallholder farmers, who make up some 80% of the continent’s farming population but control less than 5% of agricultural land. African Development Bank (AfDB) Group president Dr Akinwumi Adesina delivered the keynote address, highlighting a glaring disconnect: while agriculture contributes 30% to Africa’s GDP, it accounts for only 6% of commercial bank lending.

A key highlight of the session was a panel discussion featuring Alice Albright, former CEO of the Millennium Challenge Corporation (MCC); Brian Milder, founder and CEO of Aceli Africa; and Jules Ngankam, group CEO of the African Guarantee Fund. Moderated by former international broadcaster, Yvonne Ndege, the panel explored practical designs for sustainable financing mechanisms to bridge the financing gap in agriculture. 

Panelists identified several critical barriers to adequate financing. These include risk misperceptions in agricultural lending, high transaction costs for rural financial services, mismatches between standard loan products and agricultural business cycles, lack of formal financial records and collateral, and inequitable value chain structures that limit farmer profitability. A number of critical barriers were highlighted by the panelists including, risk misperceptions in agricultural lending, high transaction costs for rural financial services, mismatches between standard loan products and agricultural business cycles, lack of formal financial records and collateral, and inequitable value chain structures that limit farmer profitability.

Moreover, several strategic recommendations were proposed by them. These included tailoring financial approaches separately for working capital and infrastructure investment, developing risk-sharing mechanisms to attract greater participation from commercial banks, and strengthening digital financial infrastructure to lower transaction costs. They also emphasised the need for targeted subsidies to stimulate private capital investment and called for enhanced market access to help farmers capture more value from agricultural production.