News in Brief:
– The AfDB is considering a $500 million facility to unlock $10 billion in financing for smallholder farmers and agribusinesses across Africa, aiming to address the continent’s significant agricultural funding gap.
– This initiative will utilise various financial instruments and technical assistance to reduce lending risks and increase access to credit, with a focus on boosting food security and economic growth.
The African Development Bank (AfDB) is considering the establishment of a $500 million financial instrument aimed at generating $10 billion in funding for small-scale agricultural producers and agribusinesses across the continent.
AfDB President, Dr Akinwumi Adesina, announced the proposal at a conference in Nairobi focused on increasing financial access for smallholder farmers. The bank is currently seeking board approval for the initiative.
Innovative financial tools to bridge the gap
According to Dr Adesina, the proposed facility would employ a range of financial mechanisms, including trade credit guarantees, risk-sharing arrangements, blended finance, and incentives to encourage lending.
Essentially, these tools aim to reduce the high costs associated with providing financial services to small agricultural enterprises, complemented by technical assistance.
Adesina stressed the potential for significant progress, calling for collaborative efforts to address the substantial funding deficit facing these farmers.
Meanwhile, the conference, organised in partnership with the Pan African Farmers’ Organization (PAFO), addressed the critical $75 billion annual financing gap for African farmers and agricultural businesses.
Adesina highlighted the need for global cooperation, referencing the progress made since the 2023 Dakar 2 Feed Africa Summit, where African leaders committed to food security. He noted a significant increase in financial commitments from development partners, rising from $30 billion to $72 billion.
However, despite progress, access to credit for smallholder farmers remains limited, with only 6% currently having access. Financial institutions often perceive these farmers as high-risk borrowers.
Bank lending to agriculture remains low in many African nations. Therefore, AfDB Vice President, Dr Beth Dunford, urged stakeholders to take immediate action to address these challenges.
