At the “Scaling Finance for Smallholder Farmers in Africa” conference held in Nairobi, Kenya from March 17-18, 2025, agriculture experts emphasized the critical need for enhanced collaboration to address the significant $75 billion annual financing gap facing smallholder farmers. The event, organized by the African Development Bank, the Pan-African Farmers Organization (PAFO), and the Kenyan government, brought together stakeholders who acknowledged progress in agricultural sector growth but underscored the ongoing challenges in securing financing for small-scale farmers.
One of the main discussions revolved around the difficulty many farmers in Africa face when attempting to access credit from commercial banks and financial intermediaries. Giovanni Munoz, Head of East and Southern Africa Services at the Food Agriculture Organisation’s Investment Centre, highlighted that the absence of strong producer organizations in many regions exacerbates the problem. In contrast, areas where farmers are supported by robust organizations can access financing at favorable rates, benefiting from economies of scale and stronger bargaining power when procuring farm inputs. Munoz emphasized the need for long-term capacity building to help these organizations support small-scale farmers effectively, drawing on examples from Europe, where large farmer cooperative societies control value chains in industries such as hospitality, food production, and agro-processing.
In addition to fostering stronger producer organizations, experts at the conference discussed other ways to improve access to finance for smallholder farmers. Heike Harmgart, Managing Director for Sub-Saharan Africa at the European Bank for Reconstruction and Development, suggested that financing could be effectively channeled through aggregators. She argued that commercial banks must deepen their understanding of smallholder farmers to overcome the misconception that they are high-risk borrowers. According to Harmgart, smallholders are often misunderstood by financiers, which leads to them being denied funding. She advocated for the creation of risk-mitigation mechanisms by financial intermediaries to increase funding access. In some countries, partnerships between banks and credit unions have successfully extended financial access to farmers, demonstrating the potential of collaboration in boosting funding opportunities.
Digital tools were also highlighted as essential for improving smallholder farmers’ access to finance. Marie Claire Kalihangabo, Coordinator of the African Fertilizer Financing Mechanism, underscored the role of digital systems in connecting farmers with essential resources like fertilizers, seeds, and phytosanitary products, while also linking them to markets. She pointed out that such innovations have driven up funding demand by small-scale farmers and should be prioritized by value chain actors to meet these needs.
Smallholder farmers and small-to-medium-sized enterprises (SMEs) play a pivotal role in Africa’s agricultural sector, contributing 80 percent of the continent’s food production and sustaining millions of rural households. However, despite their significance, a considerable financing gap persists. According to the African Development Bank, this gap is estimated at $75 billion annually, underscoring the urgent need for solutions that can bridge the divide.
In response to these challenges, Dr. Akinwumi Adesina, President of the African Development Bank, announced the creation of a $500 million facility aimed at unlocking $10 billion in financing for smallholder farmers and agribusiness SMEs. This initiative reflects the bank’s ongoing commitment to strengthening agricultural financing across Africa and addressing the pressing needs of the agricultural sector.
The discussions at the conference underscored the importance of collaboration between financial institutions, farmer organizations, and digital platforms. By working together, stakeholders can create a more conducive environment for smallholder farmers to access the funding and resources needed to grow their businesses, improve food security, and contribute to the broader economic development of Africa.
