Boosting Smallholder Farmer Financing: Experts Call for Stronger Bank Collaboration, Digital Solutions

“In areas where farmers have formed robust organizations, they benefit from economies of scale, stronger input sourcing power, and favorable financing terms,” Munoz explained.

Agricultural policy experts and financial sector leaders have renewed calls for deeper collaboration between commercial banks and smallholder farmers across Africa, alongside the integration of innovative digital platforms, to bridge the continent’s persistent agricultural financing gap and drive sustainable rural development.

During the recently concluded “Scaling Finance for Smallholder Farmers in Africa” conference, held from March 17–18, 2025, in Nairobi, Kenya, key stakeholders acknowledged that while there has been commendable progress in supporting the agricultural sector, financing small-scale farmers continues to pose a significant challenge.

The high-level event was jointly organized by the African Development Bank (AfDB), the Pan-African Farmers Organization (PAFO), and the Government of Kenya, drawing participation from policymakers, financial institutions, agribusiness experts, and farmer representatives.

Addressing the $75 Billion Financing Gap

Smallholder farmers and agricultural SMEs form the backbone of Africa’s food system, producing up to 80 percent of the continent’s food supply and supporting millions of rural livelihoods. Despite this, the sector faces an estimated $75 billion annual financing gap, which severely restricts productivity, investment, and resilience.

To address this critical issue, Dr. Akinwumi Adesina, President of the African Development Bank, announced plans to establish a $500 million catalytic facility, aimed at unlocking up to $10 billion in financing for smallholder farmers and agribusiness SMEs. This ambitious initiative underscores the Bank’s commitment to transforming African agriculture and empowering rural communities through inclusive financing solutions.

Building Stronger Farmer Organizations

Giovanni Munoz, Head of the East and Southern Africa Service at the Food and Agriculture Organization’s (FAO) Investment Centre, highlighted the structural limitations that prevent farmers from accessing affordable credit. Chief among these, he said, is the lack of strong, well-organized producer groups that can negotiate better deals and pool resources.

“In areas where farmers have formed robust organizations, they benefit from economies of scale, stronger input sourcing power, and favorable financing terms,” Munoz explained. “Without such structures, individual farmers remain isolated and financially vulnerable.”

He emphasized the need for long-term capacity building to support the organic growth of producer organizations capable of withstanding value chain disruptions and becoming competitive players in global markets. Munoz pointed to Europe’s large cooperative farming models—which dominate value chains in food production, hospitality, and agro-processing—as a blueprint Africa can adapt.

Bridging the Trust Gap with Financial Institutions

Financial experts at the conference urged commercial banks to adopt more inclusive and informed approaches to financing smallholder farmers, who are often perceived as high-risk due to limited collateral, inconsistent yields, and lack of formal records.

Heike Harmgart, Managing Director for Sub-Saharan Africa at the European Bank for Reconstruction and Development (EBRD), noted that aggregators—such as cooperatives, off-takers, and agri-tech platforms—can play a pivotal role in linking banks with farmers.

“Banks need to understand the realities of smallholder farming. Too often, farmers are misunderstood and subsequently denied access to credit,” she said. “By partnering with trusted aggregators and leveraging risk-sharing mechanisms, banks can safely scale up agricultural lending.”

Harmgart called for the creation of agriculture-specific risk mitigation instruments and encouraged partnerships with microfinance institutions, savings and credit cooperatives (SACCOs), and rural credit unions that already operate in remote farming communities.

Digital Tools: A Game-Changer for Agricultural Financing

Marie Claire Kalihangabo, Coordinator of the African Fertilizer Financing Mechanism, stressed the transformative potential of digital technologies in expanding financial access to small-scale farmers. She noted that integrated digital platforms are already being used successfully in various countries to facilitate input purchases, credit access, and market linkages.

“Connecting farmers to digital systems for buying fertilizers, seeds, and crop protection tools has significantly increased demand for finance,” Kalihangabo said. “These innovations are helping to formalize farmer operations and make them visible to financiers.”

She urged governments, agritech firms, and value chain actors to prioritize investments in digital ecosystems that can track farmer performance, facilitate mobile payments, and enable real-time access to credit and insurance services.

Toward a Coordinated Approach

Speakers throughout the two-day conference emphasized the need for a multi-stakeholder, coordinated approach involving governments, financial institutions, development partners, and farmer-led organizations to unlock inclusive agricultural financing.

They also recommended policy reforms to create enabling regulatory environments, encourage innovation, and de-risk investment in rural areas.

As Africa's population continues to grow and climate change pressures intensify, ensuring financial inclusion for smallholder farmers is increasingly seen as not just an agricultural imperative but a cornerstone of food security, economic resilience, and social equity across the continent.

Key Takeaways from the Conference:

• Africa’s smallholder farmers produce 80% of the continent’s food but face a $75 billion annual financing gap.

• The African Development Bank will launch a $500 million fund to mobilize $10 billion for farmers and agribusiness SMEs.

• Strengthening farmer cooperatives and producer organizations is critical to increasing their access to finance.

• Commercial banks are encouraged to collaborate with aggregators and credit unions to extend credit safely.

• Digital platforms can help formalize farmer operations and facilitate financing access.

• Experts called for long-term investment in institutional capacity building, policy reform, and innovative financial tools.