African Development Bank (AfDB) Group President Dr. Akinwumi Adesina has unveiled plans for a groundbreaking $500 million facility aimed at unlocking $10 billion in financing for smallholder farmers and agribusiness enterprises across Africa.
Speaking at the High-Level Conference on Scaling Finance for Smallholder Farmers in Nairobi, Dr. Adesina announced that the Bank’s management is consulting with its Board of Directors to establish this transformative initiative.
The facility, designed to close the financing gap for smallholder farmers, will deploy innovative financial instruments such as trade credit guarantees, first-loss coverage, blended finance mechanisms, and origination incentives.
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These instruments aim to reduce the high transaction costs of supporting enterprises, with the backing of 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,” Adesina declared during his keynote address.
A collaborative vision for Africa’s agriculture
The conference, organized in partnership with the Pan African Farmers’ Organization (PAFO), addressed Africa’s critical $75 billion annual financing gap for farmers and agribusinesses.
Adesina, who recently received Kenya’s highest national honor from President William Ruto, called for global action to unlock Africa’s agricultural potential.
“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!” he emphasized.
Since the 2023 Dakar 2 Feed Africa Summit, significant progress has been made. Thirty-four African heads of state committed to advancing food security and sovereignty, with financial pledges from development partners increasing from an initial $30 billion to $72 billion in under a year.
What you should know
The African Development Bank alone has committed $10 billion, approving 77 projects worth $3.9 billion in 32 countries, with plans to approve an additional $1.72 billion this year.
- Despite these advancements, significant challenges remain. Only 6% of African smallholder farmers currently have access to credit and fewer than 20% use improved seeds.
- Financial institutions often perceive smallholder farmers as high-risk borrowers due to climate variability and insufficient collateral. As a result, bank lending to agriculture is minimal, accounting for less than 5% of total loan portfolios across many African countries, even though agriculture is a major economic driver.
The AfDB aims to address these barriers with its new $500 million facility, hoping to drive economic transformation and establish agriculture as a sustainable cornerstone of Africa’s development.
