Innovative Financing Emerges As Africa’s Key To Food Security And Climate Resilience

Kenya’s agriculture sector holds enormous potential. It contributes more than a quarter of the country’s GDP and sustains millions of households. Yet it remains underdeveloped and underfunded.

Even as global demand for safe, high-quality food increases, and climate shocks intensify, the sector receives less than five percent of total bank lending. With a food import bill of 250 billion shillings, experts warn that this financing gap threatens long-term economic goals.

During the recent Global G.A.P. TourStop in Nairobi, experts said Kenya is missing a major opportunity to strengthen its position in regional and global agricultural markets. They noted that strategic investment in agri-food systems could unlock jobs, boost trade, and increase national resilience.

A continent-wide financing challenge

This challenge extends across Africa. AGRA estimates that farmers face a financing gap of 65 billion dollars. The figure shows how deeply underinvested the sector remains.

Kenya increased agricultural financing by 3.8 billion shillings, yet funding still stands at only four percent of GDP. Policymakers, financiers, and development partners agreed that closing this gap will require a new approach to financing smallholder farmers and agri-SMEs.

The three-day forum, held under the theme Driving the region’s agri-food trade through compliance and product diversification, brought together the European Union, Global G.A.P, TradeMark Africa, 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 added that Absa aims to progressively scale lending to reflect agriculture’s true economic value.

The missing middle and the burden of collateral

Participants repeatedly highlighted the “missing middle” in agricultural finance. Many transactions are too large for microfinance institutions and too risky for commercial banks. As a result, lenders often demand collateral of up to 120 percent. This requirement locks out most smallholder farmers and agri-preneurs.

Women-led businesses face even higher barriers. Antoinette Tesha, Investment Director at Trade Catalyst Africa, explained that her organisation targets this gap through a data-driven climate finance facility supported by Mastercard Foundation and the Trade and Development Bank.

Globally, similar innovations are taking shape. The FarmFit Fund by IDH, a 100 million euro blended finance vehicle, already reaches more than three million smallholders.

Meanwhile, the Asia Climate-Smart Landscape Fund channels capital into sustainable agriculture with climate benefits.

Innovative Financing Emerges As Africa’s Key To Food Security And Climate Resilience

Fintech solutions and the need for agility

Fintech companies are also reshaping agriculture finance. Avenews, for instance, bases its lending decisions 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 at Avenews.

However, experts warned that financing alone cannot transform the sector. Many producers lack insurance coverage. In fisheries, for example, limited access to cooling facilities and low awareness of risk cover leave farmers exposed to major losses. Elizabeth Gathu from MicroSave Consulting urged agri-preneurs to invest in tailored, climate-sensitive insurance products.

Strengthening systems through partnerships

The IFC, through its AgriConnect Program, is working with banks to design farmer-focused financial products and strengthen supply chains. The goal is to create better-quality jobs and support broader global food security objectives.

Absa Bank used the forum to highlight its shift from lender to ecosystem partner. Moderating a panel discussion, Absa Agribusiness Specialist Daniel Munyambu outlined the bank’s four-pillar 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,” he said.

Absa supports farmers with compliance, traceability, audits, forex solutions, advisory services, and logistics. These efforts help producers integrate into global markets. The bank is also developing green finance tools to support technologies such as solar irrigation, cold storage, and resilient seed systems.

Smallholders at the center of transformation

Smallholder farmers supply nearly 70 percent of Kenya’s food. Yet they remain the most underfinanced. This imbalance undermines the farm-to-fork model, which promotes a safe, sustainable supply chain from production to consumption.

Participants stressed that technology will play a major role in addressing risk, reducing losses, and improving transparency across supply chains. AI-driven scoring tools, digital wallets, and mobile platforms already enable faster and more efficient loan processing.

Even so, financing is only one part of the equation. Transport, cold-chain logistics, certification, and cross-border standards still hinder growth. Experts called for alignment with AfCFTA requirements and stronger regulations to protect farmers from predatory lenders.

A consensus for the future

As the forum concluded, participants agreed that Africa’s future in agri-food systems depends on smart, sustainable, and innovative financing. With accessible capital and strong compliance, countries can strengthen food security and improve household resilience.

Kinyanjui closed the session with a reminder: Africa must unlock financing that fuels growth, not debt traps.