Innovative Financing Emerges As Africa’s Key To Food Security

Few sectors offer Kenya as much unexplored potential as agriculture does. Despite contributing to over a quarter of the country’s GDP, supplying millions of Kenyans with sustenance and employment opportunities, the sector still remains underdeveloped and underfunded. Even as the global demand for safe, high-quality food rises and climate shocks intensify, the agriculture sector receives less than five percent of total bank lending. Compared to a Ksh. 250 billion food imports bill, experts warn that the financing mismatch is a signal that can undermine the country’s long-term economic goals.

At the recently concluded Global G.A.P TourStop in Nairobi, experts highlighted that this was a missed opportunity in advancing Kenya’s sovereignty in the global agriculture markets and investment in agri-food systems that could unlock massive economic gains and boost employment.

This challenge is not unique to Kenya. Across Africa, farmers face a financing gap of USD 65 billion, according to AGRA, clearly pointing out the scale of under-investment in the sector. Despite Kenya allocating an additional Ksh 3.8 billion toward agricultural financing, the sector still remains underfunded at only four percent of GDP. According to experts at the forum, bridging this financing gap requires a fundamental shift in how smallholder farmers and agri-SMEs are financed.

In Kenya, while the sector was allocated an additional KSh 3.8 billion toward agricultural financing, it remains underfunded at only four percent of GDP. The message from policymakers, financiers, and development partners at the forum was clear: bridging this gap requires a fundamental shift in how smallholder farmers and agri-SMEs are financed. The 3-day forum that explored solutions under the theme Driving the Region’s Agri-Food Trade Through Compliance and Product Diversification, was supported by the European Union, Global G.A.P, TradeMark Afriva, IFC, and Absa Bank Kenya

“Agri-financing in Kenya sits at about four percent, compared to agriculture’s 22 percent contribution to GDP. That gap must close,” said Simon Kinuthia, Head of Agribusiness at Absa Bank Kenya. He also noted that Absa Bank aims to progressively scale lending to match agriculture’s economic weight of financing from current 4 percent to at least over 20 percent.

During the forum, a recurring theme was the missing middle in agricultural financing, where transactions are deemed too risky for commercial banks and too large for microfinance institutions. In these cases, financial institutions will demand collateral of up to 120 percent, which excludes most smallholder agri-prenuers.

Antoinette Tesha, Investment Director at Trade Catalyst Africa, explained that women-led businesses face even higher barriers. Trade Catalyst Africa is closing this gap through a data-driven climate finance facility, supported by Mastercard Foundation and Trade and Development Bank. Globally, similar innovations are taking shape. Examples include the FarmFit Fund by IDH, which is a €100 million blended finance vehicle, which already reaches more than three million smallholders, while the Asia Climate-Smart Landscape Fund channels capital into sustainable agriculture with climate co-benefits.

Fintech firms have not been left behind in reshaping agri-finance, with companies like Avenews extending credit based on trade data and customer orders, rather than title deeds.

“Agribusinesses need speed and agility. Cash flow is king. We finance based on transactions, not just balance sheets,” said Nancy Kinyanjui, Managing Director, Avenews.

Experts at the forum also expressed concerns about risk exposure and losses due to lack of insurance covers. In fisheries, for instance, many producers lack cooling facilities and have little understanding of risk cover leaving them vulnerable to severe losses. Elizabeth Gathu from MicroSave Consulting advised agri-prenuers to invest in tailored, gender and climate-sensitive insurance covers to mitigate such risks.

The IFC, through the AgriConnect Program, is working with banks to develop bespoke farmer-focused products and strengthen supply chains, to create better quality jobs in agriculture. Experts emphasized that these solutions must connect to the broader global food security and hunger reduction objectives.

During the forum, Absa Bank reinforced its strategic shift from lender to ecosystem partner. Moderating a panel discussion, Absa Bank’s Agribusiness Specialists, Daniel Munyambu, outlined the bank’s four-pillar agri-business strategy: access to information, access to markets, coaching and mentorship, and sustainable finance.

“Standards such as Global G.A.P are no longer optional if farmers want access to the European Union or UK markets,” Munyambu said.

Absa, he added, supports farmers to navigate compliance, from traceability and audits to forex solutions, advisory and logistics, to help them integrate into global markets. This places Absa at the center of Africa’s push for climate-resilient, market-ready agriculture. The bank is also developing green financing tools to back climate-smart practices as farmers adopt technologies like solar irrigation, cold storage and resilient seed systems.

In Kenya, smallholder farmers account for nearly 70 percent of national food production, yet remain the most underfinanced, undermining the EU-inspired farm-to-fork approach, which envisions a seamless chain from production to consumption that guarantees food safety, access, and sustainability.

Further, participants highlighted the role of technology in improving risk assessment, loss reduction and transparency in supply chains. They noted that technology levels the playing field, with AI-driven scoring and digital wallets enhancing efficiency and faster processing of loans to farmers.

They also noted that financing alone will not transform agri-food systems. Transport, cold chain logistics, and certification and cross-border standards continue to hinder the sector’s growth. Urgent in the priorities were alignment with AfCFTA standards and tighter regulations to protect farmers from predatory lenders.

As the forum drew to a conclusion, all participants were in consensus that Africa’s agri-food transformation hinges on smart, sustainable, and innovative capital. With accessible financing and compliance, Africa’s food security and household resilience will be strengthened.

In concluding the forum, Kinyanjui reminded audiences that Africa needs to unlock financing that fuels growth, not debt traps.

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