African Development Bank Mulls $500 Million Facility To Mobilize Financing For Smallholder Farmers

African Development Bank Group President, Dr. Akinwumi Adesina, has announced plans to launch a $500 million facility designed to unlock $10 billion in financing for smallholder farmers and small agribusiness enterprises across Africa. 

Speaking at the High-Level Conference on Scaling Finance for Smallholder Farmers in Nairobi, Adesina revealed that Bank management is currently consulting with its Board of Directors on establishing this groundbreaking facility.

The facility will deploy multiple financial instruments, including trade credit guarantees, first-loss coverage, blended finance mechanisms, and origination incentives to reduce the high transaction costs of serving enterprises, complemented by technical assistance.

“We stand on the threshold of making history by pushing the boundaries of innovation and building extensive collaborative alliances to bridge the financing gap faced by smallholder farmers and agribusinesses,” said Adesina in his keynote address.

Organized in partnership with the Pan African Farmers’ Organization (PAFO), the conference sought to address Africa’s critical $75 billion annual financing gap for farmers and agricultural enterprises.

Adesina, who was recently awarded Kenya’s highest national honor (https://apo-opa.co/4bOA8Rm) by President William Ruto—called for global action: “Together, let us unleash the potential of agriculture in Africa. Let us make Africa the breadbasket of the world. And together, let us feed Africa with pride!”

Progress since Dakar 2 Feed Africa Summit 

Adesina highlighted substantial progress since the 2023 Dakar 2 Feed Africa Summit, where 34 African heads of state committed to ensuring food security and sovereignty.

Financial commitments from development partners have surged from an initial $30 billion to $72 billion in less than a year, with the African Development Bank pledging $10 billion. The Bank has approved 77 projects valued at $3.9 billion to support the implementation of Country Food and Agriculture Delivery Compacts across 32 countries, with an additional $1.72 billion in planned approvals this year.

Key initiatives supporting smallholder farmers 

The Bank has launched several major initiatives to strengthen smallholder farmers:

The Technologies for African Agricultural Transformation (TAAT) initiative has reached 25 million farmers with high-yield, climate-resilient crops, boosting Africa’s food production by 120 million tons.

The African Emergency Food Production Facility, a $1.5 billion program, has delivered 459,000 tons of seed and 2.8 million tons of fertilizer to 12.3 million farmers, producing 37.6 million metric tons of food.

The Special Agro-Industrial Processing Zones initiative has invested $934.51 million, with $938.27 million in co-financing, supporting 27 projects in 11 countries.

The Affirmative Finance Action for Women in Africa (AFAWA) program has approved $2.52 billion in funding for 24,000 women-led businesses.

The African Fertilizer Financing Mechanism has implemented trade credit guarantees in nine countries, distributing 125,193 metric tons of fertilizer worth $62.8 million to 776,971 smallholder farmers.

The Inputs Supplier Risk Sharing Program, a $600 million initiative, is working to de-risk input supply chains in Uganda, Kenya, Tanzania, Ghana, and Zambia.

The Mobilizing Access to the Digital Economy (MADE) Alliance Africa, in partnership with Mastercard, has seen the Bank commit $300 million to integrate 3 million farmers in Kenya, Tanzania, and Nigeria into the digital economy.

Addressing persistent challenges 

Currently, only 6% of African smallholder farmers have access to credit, and less than 20% use improved seeds. Financial institutions often perceive smallholder farmers as high-risk borrowers due to climate variability and lack of collateral. Bank lending to agriculture remains low, accounting for less than 5% of total loan portfolios in many African countries, despite the sector being a major economic driver.

“For some of you, these numbers may sound familiar; for the rest of us, they should be frustrating to hear. We must act now to change this reality,” urged Dr. Beth Dunford, Vice President for Agriculture, Human, and Social Development at the Bank, speaking at the opening session on Monday.

PAFO President Ibrahima Coulibaly urged stakeholders to take bold action: “If we want to save our continent from hunger, malnutrition, and poverty, we must create jobs in the agricultural sector. There is no other sector capable of doing this.”

Kenyan Cabinet Secretary for Agriculture and Livestock Development, Senator Mutahi Kagwe, called for urgent implementation: “If we prioritize innovative, practical measures, we will transform agriculture into a thriving business. Let’s commit to ensuring that no farmers are left behind due to lack of finance.”

On Tuesday, a panel of leading global and African financial experts also issued a resounding call to align financial structures with the needs of smallholder farmers. They underscored the crucial role of government in creating an enabling environment for financial institutions to expand agricultural lending.