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Across Africa, small and medium agribusinesses remain stuck in what experts call the “missing middle” of finance. The common argument is that collateral is the biggest barrier to accessing agricultural loans. Farmers are often asked to present land titles, fixed assets, or formal income records before banks can consider them for credit. But for many emerging agripreneurs, the real difficulty comes much earlier. The challenge is not just what they own, but what they can prove.
At a conference in Kenya earlier this year, former president of the African Development Bank, Dr Akinwumi Adesina, spoke about the imbalance in agricultural financing. He noted that agriculture contributes 30 percent of Africa’s GDP, yet only 6 percent of commercial bank lending goes to the sector. The World Economic Forum has also estimated a $100 billion financing gap, with three out of four agri-SMEs unable to access credit from banks. Many of these businesses are too big for microfinance institutions, but still too informal to qualify for commercial loans.
This is the structural problem: the financial system filters out farmers who do not yet meet strict lending conditions instead of supporting them to grow into eligibility. Without verified records, audited accounts, or documented cash flows, many agripreneurs remain excluded, despite supplying formal markets and operating at significant scale.
Experts argue that inclusive financing must close this gap by creating capital pathways that prepare farmers for commercial credit, rather than abandoning them. The idea is similar to advancing through the stages of education, where each level builds on the last until the learner is ready for more complex environments.
In the first stage, when a farmer is just starting out, the focus is on learning how to manage input costs, production cycles, and day-to-day operations. At this stage, demanding repayment obligations is premature. Instead, grants and self-funding provide the right foundation. Donor-funded programmes, government stimulus packages, philanthropic funding, and early-stage support from development finance institutions are designed to build capability rather than test creditworthiness.
This early capital acts like basic education – helping farmers establish recordkeeping, track inputs, plan operations, and interact with markets for the first time. These practices prepare them for future growth and gradually build the structures that will matter to lenders.
The second stage is similar to secondary school education. By now, the farmer generates some surplus and operates more consistently, but still needs support. Here, concessional finance is the right tool. These loans, usually offered at below-market interest rates with flexible repayment terms, help farmers learn repayment discipline without crushing their operations. Government credit schemes, guarantee-backed instruments, and blended finance structures where public or donor funds share part of the risk, can all play a role.
This stage is not just a stopgap; it is critical in building credibility. By engaging with concessional finance, agripreneurs begin to formalise their operations, strengthen relationships with buyers, and create a financial track record. It is also where more innovative credit scoring can emerge, using behavioural data and alternative metrics to assess progress and reduce exclusion.
Finally, the third stage mirrors tertiary education. By this point, the agribusiness has stable output, reliable buyers, and predictable cash flows. With stronger financial records, they are more likely to access commercial loans on market terms. Banks, at this stage, view them as creditworthy because of the maturity built through earlier stages.
This graduated approach is not about keeping farmers dependent on aid. Instead, it is about sequencing risk in a way that allows them to grow responsibly into scalable agribusinesses. It also ensures donor and public funds are used more efficiently. Those who succeed can transition into the next stage, freeing up resources to support new agripreneurs.
Closing the agricultural financing gap in Africa requires more than collateral reform. It demands a financial system designed to nurture growth from the ground up – one that recognises the realities of farmers, builds their readiness for credit step by step, and unlocks the sector’s full potential.
