Nairobi: African banks have the capacity to develop tailored financial products by innovating beyond traditional loan structures and creating flexible, low-interest credit products for smallholder farmers. Agriculture and Livestock Cabinet Secretary Mutahi Kagwe emphasized this potential during a high-level conference focused on enhancing smallholder farmers' access to financial resources.
According to Kenya News Agency, Kagwe highlighted that the primary barriers farmers face include limited access to affordable credit due to a lack of collateral, credit histories, and financial literacy. Many farmers rely on high-interest informal lending or insufficient government subsidies, which hampers their ability to purchase essential supplies such as fertilizers and modern agricultural inputs. Climate change further exacerbates these challenges, keeping many trapped in poverty and hindering Africa's agricultural potential.
Kagwe urged banks to expand risk mitigation tools by promoting agriculture-specific insurance schemes and guaranteeing funds to reduce lending risks for banks and farmers. He stressed the need for practical and inclusive financing solutions to support agriculture's transformation from a subsistence activity to a commercially viable sector. Technology, such as mobile banking and fintech solutions, can accelerate these efforts by providing digital financial services to unbanked rural farmers.
The conference, organized by the African Development Bank Group (AfDB) and the Pan-African Farmers Organization (PAFO) and hosted by the Kenyan government, addresses smallholder farmers' access to financial resources, investment opportunities, market infrastructure, capacity-building initiatives, and sustainable agricultural practices.
Beth Dunford, Vice President for Agriculture, Human and Social Development at AfDB, revealed plans to establish a USD 500 million facility to support first loss, technical assistance, and blended finance. This facility aims to leverage up to USD 10 billion in trade credit guarantees and risk-sharing facilities. Dunford noted that only six percent of African smallholder farmers currently have access to credit, while less than 20 percent use improved seeds. She emphasized the importance of mobilizing sustainable investments to address the USD 75 billion annual financing gap.
James Mwangi, CEO of Equity Bank Group, criticized low agricultural productivity and called for governments to address weak agricultural advisory and extension services. He urged policymakers to treat farmers as commercial players rather than a social sector group, advocating for public infrastructure such as farmers' cooperative societies to empower smallholder farmers.
The conference, titled 'Scaling Finance for Smallholder Farmers in Africa,' seeks to develop actionable plans to enhance the financial ecosystem for smallholder farmers, thereby driving sustainable agricultural transformation and fostering economic growth across the continent.