Agricultural Finance in Africa

Climate change can affect agriculture in multiple ways, leading to increased production risks that impact the viability of farm businesses and the capacity of agrifood systems to deliver nutritious, safe and affordable diets.

Climate Smart Agriculture (CSA) is an approach aimed at increasing farm productivity sustainably, taking into consideration climate change concerns and impacts. More specifically, the World Bank defines CSA as an approach to managing landscapes — cropland, livestock, forests, fisheries and their value chains — that aims to achieve three “wins”:

1. Increased productivity to improve food security and boost farmers’ incomes;
2. Enhanced resilience to drought, pests, disease and other shocks;
3. Reduced GHG emissions.

IFC’s Strategy is to contribute to CSA by providing investments and advisory operations that contribute to the three pillars of CSA.

This section provides the latest market intelligence reports and toolkits to assess the impacts of climate change on specific agricultural value chains and business / financial solutions to address these risks and impacts.

Women in rural areas, and in particular female farmers, have significantly less access to financial services than their male counterparts.

IFC invested $3.4 billion across the agribusiness supply chain — from farm to retail — to help optimize production, increase liquidity, improve logistics and distribution, expand access to credit for small farmers, and boost gender equality. At the end of the fiscal year, IFC’s agribusiness portfolio stood at $5.6 billion. However, despite a significant agribusiness portfolio, gaps between men and women remain and IFC cannot act alone. Including women more equally will require both further partnership with and investments from private sector actors along the value chain. Fortunately, an increasingly strong body of evidence confirms that gender-smart solutions in agribusiness can increase the sector’s productivity and profitability and lead to stronger, more integrated value chains.

This section provides the latest market intelligence reports and toolkits to assess gender-driven challenges across the agricultural value chain and implement new solutions to better serve female farmers and the female client base.

An AgTech can play a critical role in de-risking agri-finance for financial institutions at the AgTech secures the production cycle, provides reliable data on farmers, and offers an innovative approach to banks for de-risking smallholder farmers' lending. The integration of smallholder farmers into the value chain can increase their income, and AgTechs, serving as the "new age" cooperatives, have the potential to facilitate this integration and provide the above services. For many AgTechs the ability to scale is impeded by a lack of working capital. Likewise, aggregators and off-takers also lack access to working capital for commodity purchases. 

Recognizing these challenges and opportunities, IFC established the Africa Agriculture Accelerator Program (AAA), aiming to pilot partnership models between AgTechs and financial institutions to mitigate risks associated with lending to smallholder farmers. 

This section provides the latest market intelligence reports and firm profiles of the Agtech market in Africa. 

By 2030 the African needs to feed a population of 1.3 billion. 34% of areas with high population growth are in areas of high risk for food security. 60%-80% percent of the population are employed in agriculture and the contribution to GDP is 32% on average. To feed its population the continent will need to increase agricultural productivity by 50%. Wheat, rice, and maize collectively constitute nearly half the dietary energy supply for the African population, yet paradoxically, they are the primarily imported crops. There is significant untapped potential for Africa to attain food security in these staple crops by increasing productivity of existing farmland, enabling the continent to meet 267% of its total food needs, while ensuring nutritious diets through increased productivity in other crops.

In the face of Africa's mounting challenges with food security, compounded by the impacts of climate change, the impediment of limited access to finance stands out as the most significant barrier to fostering productive agriculture on the continent. Demand for finance is far exceeding supply. Financing is required to secure high quality inputs, mechanization of production, transport to markets and storage, adopt new technologies. Only 3-5% of total assets are directed towards agriculture, the bulk for agri businesses rather than production.

A comprehensive data mining exercise conducted by FIG Africa, based on 2020 FAO and World Bank data, yielded valuable insights. This exercise resulted in:

1. defining the food security gap, focusing on the production deficit of the most imported crops (wheat, maize, and rice) needed to meet 100% of continents’ demand;
2. identifying 32 priority countries that could enable Africa to achieve 154% of its demand in wheat, rice, and maize by enhancing productivity on existing farmland (67 million hectares); and
3. assessing the investment needed to reduce food insecurity by 12% by 2026 (US$ 1.4billion).

This section provides the latest market intelligence reports and research covering food security and agrifinance in Africa.