African Development Bank Group President, Dr Akinwumi Adesina, has announced plans to launch a US$500 million facility aimed at unlocking US$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 the Bank’s management is currently consulting with its Board of Directors on establishing this pioneering facility.

The facility will deploy multiple financial instruments, including trade credit guarantees, first-loss coverage, blended finance mechanisms, and origination incentives to lower 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.

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

Adesina, who was recently awarded Kenya’s highest national honour 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 significant 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 US$30 billion to US$72 billion in less than a year, with the African Development Bank pledging US$10 billion.

The Bank has approved 77 projects valued at US$3.9 billion to support the implementation of Country Food and Agriculture Delivery Compacts across 32 countries, with an additional US$1.72 billion in planned approvals this year.

Key initiatives supporting smallholder farmers

The African Development 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, increasing Africa’s food production by 120 million tonnes.

Meanwhile, the African Emergency Food Production Facility, a US$1.5 billion programme, has provided 459,000 tonnes of seed and 2.8 million tonnes of fertiliser to 12.3 million farmers, resulting in the production of 37.6 million metric tonnes of food.

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

Women entrepreneurs have also benefited from the Affirmative Finance Action for Women in Africa (AFAWA) programme, which has approved US$2.52 billion in funding for 24,000 women-led businesses.

To improve access to essential agricultural inputs, the African Fertiliser Financing Mechanism has implemented trade credit guarantees in nine countries, facilitating the distribution of 125,193 metric tonnes of fertiliser worth US$62.8 million to 776,971 smallholder farmers.

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

Furthermore, the Bank is advancing digital transformation in agriculture through the Mobilising Access to the Digital Economy (MADE) Alliance Africa, in partnership with Mastercard.

This initiative has secured a $300 million commitment from the Bank to integrate 3 million farmers in Kenya, Tanzania, and Nigeria into the digital economy, enhancing their financial inclusion and market access.

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.

On March 21, 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.

Featured image credit: African Development Bank