AfDB unveils US$500M facility to unlock US$10B for African agriculture

AFRICA – The African Development Bank (AfDB) has announced a US$500 million facility designed to unlock US$10 billion in financing for smallholder farmers and agribusinesses across Africa. 

The initiative, revealed by AfDB President Dr. Akinwumi Adesina at the High-Level Conference on Scaling Finance for Smallholder Farmers in Nairobi, seeks to address the continent’s US$75 billion annual agricultural financing gap.

Agriculture remains a critical sector in Africa’s economy, yet access to financing continues to hinder productivity and growth. 

Despite agriculture’s contribution to employment and GDP in many African nations, financial institutions allocate less than 5% of their loan portfolios to the sector. Only 6% of smallholder farmers in Africa have access to credit, and fewer than 20% use improved seeds, limiting their ability to increase yields and improve food security.

To bridge this financing gap, AfDB’s facility will introduce financial instruments such as trade credit guarantees, first-loss coverage, blended finance mechanisms, and origination incentives. 

These tools aim to reduce transaction costs and mitigate risks for banks and financial institutions, encouraging more investment in smallholder farming and agribusiness enterprises. 

The bank is currently in discussions with its Board of Directors to finalize the initiative’s implementation.

AfDB’s commitment to agricultural growth

The new facility builds on AfDB’s ongoing efforts to enhance agricultural productivity and food security across the continent. 

Since launching its Feed Africa strategy, the bank has committed US$10 billion to the sector, approving 77 projects worth US$3.9 billion in 32 countries. This year, AfDB plans an additional US$1.72 billion in approvals to support agricultural development.

At the 2023 Dakar 2 Feed Africa Summit, 34 African heads of state pledged to prioritize food security and sovereignty, leading to an increase in financial commitments from US$30 billion to US$72 billion within a year. 

Dr. Adesina emphasized the need for global collaboration in transforming Africa into an agricultural hub capable of feeding itself and contributing to global food supply chains.

Regional and global support for agricultural financing

Dr. Adesina’s announcement comes amid growing recognition of Africa’s potential in agricultural trade. 

The continent has 65% of the world’s uncultivated arable land, yet it remains a net importer of food. 

Increasing investment in smallholder farmers and agribusinesses is expected to improve productivity, reduce post-harvest losses, and enhance market access for agricultural products.

Similar financial facilities have been launched in other regions to stimulate agricultural investments, underscoring the need for scalable models that can address systemic barriers in agricultural lending.