AfDB, PAFO partner to ease smallholder farmers’ access to finance
The African Development Bank (AfDB) and the Pan-African Farmers Organisation (PAFO) have partnered to tackle one of the most pressing challenges facing African smallholder farmers—access to finance. Recognizing the crucial role of smallholders in Africa’s food security and economic growth, both organizations will host a high-level conference in Nairobi from March 17–18, 2025, bringing together financial institutions, policymakers, and agricultural stakeholders to explore solutions for improving financial inclusion in the sector.
Dr. Babafemi Oyewole, CEO of PAFO, highlighted that limited access to credit, savings, and insurance keeps many farmers trapped in poverty, preventing long-term investments in productivity-enhancing technologies and market expansion. The conference will engage African financial institutions and policymakers to develop viable financing models that de-risk agricultural lending.
One major barrier to smallholder financing is the perceived high risk associated with agriculture. Weather unpredictability, market fluctuations, and lack of collateral make financial institutions hesitant to provide credit. To address this, the conference will showcase successful financing models such as collective savings groups, risk-sharing mechanisms, and tailor-made financial products designed for smallholders.
PAFO and its member organizations are actively working to strengthen farmers’ access to finance by leveraging collective bargaining power, negotiating better prices for inputs and outputs, and connecting farmers with financial institutions. Organized farmer groups reduce lenders’ risk perception, making it easier for smallholders to access credit and insurance.
Dr. Oyewole also emphasized the need for policy reforms to encourage banks and microfinance institutions to invest in smallholder agriculture. He urged governments to implement risk-sharing programs, improve land tenure policies, and offer incentives such as subsidies and tax breaks to promote agricultural financing.
PAFO aims to ensure that the outcomes of the Nairobi conference lead to tangible improvements for farmers, with recommendations implemented in collaboration with governments, financial institutions, and development partners. Dr. Oyewole reaffirmed PAFO’s vision of a thriving and sustainable African agricultural sector, emphasizing financial inclusion as a critical pillar of its advocacy efforts.
While acknowledging progress made through AfDB’s Feed Africa strategy and other agricultural investment programs, he stressed that smallholders must remain at the center of these initiatives to maximize impact. The 2023 Memorandum of Understanding (MoU) between PAFO and AfDB marked a significant step in strengthening financial support for farmers, ensuring they receive the necessary capital to scale their operations.
Looking ahead, Dr. Oyewole warned that Africa must prepare for shifting global financial dynamics. With traditional development aid declining, he called for the development of sustainable domestic financing strategies to support agriculture and safeguard food security.
Source- Tribune
Expert Review for Agri-Food Stakeholders
The collaboration between AfDB and PAFO to improve smallholder farmers’ access to finance is a crucial step toward unlocking Africa’s agricultural potential. Limited access to affordable credit remains a significant bottleneck for smallholder productivity and market competitiveness.
To ensure the success of this initiative, stakeholders should focus on:
- Developing Risk-Sharing Mechanisms – Financial institutions need guarantees or insurance-backed products to reduce their perceived risks in lending to smallholders. Government-backed credit guarantee schemes or blended finance models could bridge this gap.
- Enhancing Farmer Financial Literacy – Many smallholders struggle with loan repayment structures and financial planning. Integrating financial education into agricultural extension services can equip farmers with the knowledge to manage loans effectively.
- Leveraging Digital Financial Solutions – Mobile banking, fintech solutions, and blockchain-powered smart contracts can provide farmers with easier access to credit and secure transactions without the need for physical banking infrastructure.
- Strengthening Agricultural Cooperatives – Organized farmer groups can enhance collective bargaining power, create economies of scale, and attract better financial terms from lenders. Governments and private stakeholders should invest in cooperative models.
- Creating Structured Value Chain Financing – Linking farmers to stable off-takers (such as food processors or export companies) can serve as collateral for loans, reducing lender risk and ensuring farmers have guaranteed market access.
This conference presents a strategic opportunity to shift from rhetoric to action by fostering policies and financial instruments that make smallholder agriculture bankable. AfDB and PAFO must ensure that discussions lead to real implementation, with measurable outcomes that improve financial access for farmers across Africa.”
