From Farms to Finance: Investment in Agriculture and SMEs

Agriculture remains the backbone of economies like Kenya, Tanzania, and Uganda – and a sector where traditional aid often played a big role (through grants, input subsidies, and extension programs). Now, development finance is helping modernize agriculture and agribusiness through investments that span the entire value chain. The focus is on boosting productivity, adding value to farm produce, and improving market access for farmers – all in a financially sustainable way.

One concrete example is in Kenya’s fisheries sector. DFC extended a $20 million loan to Victory Farms, an East African aquaculture company, to expand sustainable fish farming in Lake Victoria. This financing helps Victory Farms increase affordable protein supply for local consumers while reducing pressure on wild fish stocks – combining food security goals with market-based growth. Similarly, to strengthen food supply chains, DFC provided a loan to Cinch Markets, a Kenyan agri-tech firm, to improve smallholder farmers’ access to markets and fair prices. By investing in agribusiness innovators, DFIs are plugging the funding gaps left by donor-funded programs like USAID’s former Feed the Future initiative. These ventures can make farming more profitable and resilient without perpetual subsidies, illustrating the potential of an investment-led approach to agricultural development.

Another critical element is financing for small businesses and cooperatives in the agricultural sector. In Rwanda, DFC partnered with USAID to offer a $20 million loan guarantee to Bank of Kigali, aimed at expanding lending to small and medium-sized enterprises (SMEs) in the agricultural value chain. This type of risk-sharing instrument encourages local banks to extend credit to farmers, agro-dealers, and rural entrepreneurs who were previously seen as too risky. Likewise in Kenya, a $19.5 million DFC guarantee to the Co-operative Bank is strengthening agricultural supply chains by helping roll out digital financial tools for smallholders (through Mastercard’s Community Pass platform). These examples show how blended finance – combining DFI capital with donor or government partnership – can stimulate private lending in underserved sectors. Rather than giving grants, development finance often provides that initial push or cushion (like a guarantee or technical assistance) that enables local financial institutions to lend sustainably to farmers and agri-SMEs.

East African governments are also proactively courting climate-focused agricultural investments. Rwanda recently launched a $335 million Climate-Smart Agriculture Investment Plan with support from IFC and the Rwanda Green Fund, aiming to attract private investment into sustainable irrigation, climate-resilient crops, and agribusiness value chains. Two-thirds of this plan’s investment potential is in water and irrigation infrastructure – a priority as climate change disrupts rainfall patterns. By structuring a pipeline of bankable projects (from efficient irrigation systems to post-harvest storage), Rwanda is creating opportunities for DFIs and impact investors to step into what was traditionally aid territory. It’s a forward-looking strategy that expects the private sector to be a partner in achieving food security, with development banks playing a supporting role in de-risking and technical know-how.

Notably, development finance in agriculture goes beyond farm production into processing, logistics, and even retail – spurring rural job creation and higher incomes. For instance, the Boost Africa Initiative, a joint effort of AfDB and European partners, is investing €200 million in African start-ups over several years, many of them agri-tech and agri-processing ventures. By nurturing homegrown businesses, these programs aim to modernize agriculture in East Africa through innovation and entrepreneurship. The shift from aid to investment is encouraging agribusiness startups to solve problems like post-harvest losses or lack of cold storage because they see a market opportunity, not just a donor-funded project. In turn, farmers and consumers benefit from more efficient value chains and access to services.