Agricultural policy experts have called for deeper collaboration between commercial banks and farmers, along with the adoption of quality digital platforms in renewed efforts to enhance funding access for small-scale growers.
During the "Scaling Finance for Smallholder Farmers in Africa" conference held in Nairobi, Kenya from 17-18 March 2025 , stakeholders acknowledged the progress in stimulating agricultural sector growth but noted that securing financing for small-scale farmers remains a significant challenge. The conference was organized by the African Development Bank, jointly with the Pan-African Farmers Organization (PAFO) and the Kenyan government.
Giovanni Munoz, Head of East and Southern Africa Service at the Food Agriculture Organisation's Investment Centre, noted that many farmers in Africa struggle to access credit from commercial banks and financial intermediaries due to the absence of strong producer organizations.
"In regions where farmers are advancing agriculture through robust organizations, they can access financing at favorable rates, benefiting from economies of scale and stronger bargaining power when sourcing farm inputs," Munoz stated during a panel discussion on funding and investment opportunities from the supply side.
He emphasized the need for long-term capacity building to empower producer organizations to support small-scale farmers effectively. "These organizations must be allowed to grow organically to withstand value chain challenges and gain the momentum needed to compete with the 'big boys' in the global market," Munoz said. He cited Europe's large farmer cooperative societies as a model for Africa, which control value chains in sectors such as hospitality, baking, food production, and agro-processing.
Heike Harmgart, Managing Director for Sub-Saharan Africa at the European Bank for Reconstruction and Development, underscored that financing smallholders could be efficiently channeled through aggregators. "Commercial banks need to deepen their understanding of smallholder farmers so that they can be able to enhance access to funding. Farmers, particularly smallholders, are often misunderstood by financiers, a situation that leads to them being denied funding, and commercial banks perceiving them as high-risk borrowers," she said.
To address this, Harmgart urged financial intermediaries to create risk-mitigation mechanisms for agriculture-related financing. "By doing so, commercial banks and other financial players can scale up funding for small-scale farmers. In various countries, banks partner with credit unions to extend financial access to farmers, thereby increasing funding opportunities.
Marie Claire Kalihangabo, Coordinator of the African Fertilizer Financing Mechanism, stressed the importance of digital tools in boosting smallholder farmers' access to finance. "Connecting farmers to digital systems to purchase fertilizers, seeds, and phytosanitary accessories and equally linking them to markets has increased funding demand by small-scale farmers. Such innovations should be prioritized by value chain actors," she said.
Smallholder farmers and SMEs are the backbone of Africa's agricultural sector, accounting for 80 percent of the continent's food production and sustaining millions of rural households. However, a substantial $75 billion annual financing gap persists, according to the African Development Bank.
In response, the Bank's President, Dr. Akinwumi Adesina, announced plans to establish a $500 million facility to unlock $10 billion in financing for smallholder farmers and agribusiness SMEs, reinforcing the institution's commitment to strengthening agricultural financing in Africa.
