Smallholder farmers in Africa still face challenges when it comes to finance and insurance

Posted on: 20/11/2020

When thinking about agriculture and innovation, finance is always relevant. This includes everything from how businesses are supported in their innovation journey, to how customers are going to gain finance to access an agricultural product or service. We dived into some of the challenges facing AgriFood and smallholder financing in one of our Virtual Missions sessions on finance and insurance for AgriFood in Africa.

The GCRF AgriFood Africa Virtual Missions are all about building a community of stakeholders from African countries and the UK, to work on innovative and sustainable ways to manage food production systems in Africa.

The following four speakers shared their knowledge and told us about inventive projects that are addressing gender equality in Africa. Here’s an overview of their talks. You can watch the full talks here.


There are many barriers that prevent smallholder farmers from accessing affordable financial services and the negative consequences of farmers having limited access to these services are broad-reaching. However, a lack of access to financial services doesn’t just apply to individual smallholders, the agricultural sector as a whole receives limited investment. We explored some of the reasons for this in one of our Virtual Missions sessions on finance and insurance. 

Financial services for smallholder farmers

Access to affordable financial services is crucial to the ability of smallholder farmers to invest in their farm, remain resilient against shocks, and prepare for their families’ futures. Savings, credit, insurance, payments, transfers and remittances are all vital tools to support in achieving a number of the sustainable development goals, from eliminating extreme poverty, to promoting gender equality. Yet globally 1.7 billion people remain excluded from formal financial systems.

There are many organisations looking at ways to design financial services for smallholder farmers, and often the design of the product itself as well as its delivery route can be a barrier to adoption. Understanding a customer’s needs and motivations are key to the successful design of financial services, as often, just offering a service is not enough to ensure uptake by customers. For example, in the case of agricultural insurance services the biggest pain point is often not the availability of data (e.g. weather data) to be able to offer the product, it’s whether farmers think having insurance is worthwhile or important.

The route in which a product is marketed or delivered to a customer also impacts how open they are to adopting it. Business to Customer (B2C) models are often especially challenging to implement, where trust and understanding by farmers can be a key barrier to the adoption of a financial product. Therefore, Business to Business (B2B) approaches, where a partner already has a relationship with farmers may be more effective when introducing a new product.

Investment in agriculture in Africa

When we consider investment in the agricultural sector in Africa as a whole, it is limited. Commercial banks are generally risk averse, and within the investment space, even those who consider impact, still demand high returns. As a consequence, sectors such as fintech and energy, which offer higher returns, can be seen as more desirable by investors, despite agriculture’s central role in securing livelihoods. Despite this, there are promising examples of the increasing involvement of commercial banks within the AgriFood sector. Commercial banks sometimes have a dedicated program for commercial agricultural lending, and innovations around the role of concessional financing within the sector. 

When we look at the agricultural sector and innovation  as a whole, we must also consider the roles and requirements of different investment sources to enable continued growth in agribusiness and innovation. Getting innovations to market is a challenge in all sectors and countries and the right funding opportunities can ease this. At KTN we have recognised this within the UK and have a dedicated team to help organisations access funding and finance.

Finance and insurance is one of the topics we addressed during our Virtual Missions. We also covered gender equality and Official Development Assistance (ODA). If you’d like to keep up to date with information about the GCRF AgriFood Africa project, click here. 


Additional Reading

GSMA Nigeria report

GSMA insurance report

The impact of Official Development Assistance on the AgriFood sector

Tackling gender equality improves success rate for AgriFood projects


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