Adapted financial services – a key to transforming agricultural and food systems

"Investment in agriculture is not just a business, it is an investment in food security and rural development.” This conviction of former UN Secretary-General Kofi Annan has characterised the work of the global project "Agricultural finance for agribusinesses in rural areas" since 2016. Nine African countries – Benin, Burkina Faso, Côte d'Ivoire, Cameroon, Malawi, Mali, Nigeria, Zambia and Togo – have improved access to adequate financial services for small agricultural and processing businesses with the support of German development cooperation. The co-operation partners are local financial institutions, agricultural companies and various ministries of the respective governments. 

In mid-March 2025, delegations from the nine countries, consisting of representatives from government, financial institutions and civil society, met with representatives from the African Union Development Agency (AUDA-NEPAD) and the International Fund for Agricultural Development (IFAD) as well as from the German Federal Ministry for Economic Cooperation and Development (BMZ), Kreditanstalt für Wiederaufbau (KfW) and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) at a conference in Berlin/Germany. The aim of the three-day conference with around 100 participants was to agree on successful, broad-based solutions and develop strategic approaches on how these can drive forward the necessary transformation of agricultural and food systems. The results were summarised in a declaration that was handed over to the AUDA-NEPAD representative, Chola Mfula, at the end of the conference. They are to contribute to the implementation of the AU's Comprehensive Africa Agriculture Development Programme (CAADP) within the framework of the recently adopted Kampala Declaration. 

Lending to agricultural businesses is not very attractive for African commercial banks, as the business is small-scale and risky – or the loans are too expensive for the borrowers. In addition, small rural businesses are often not very market-orientated and are barely integrated into the cash economy. To provide agricultural and processing businesses with access to suitable financial services, GIZ works with both local financial institutions and agri-based enterprises. The aim is to adapt the financial services of the formal financial sector to the needs of agricultural businesses and agri-based rural enterprises. Furthermore, participants from both sides are gaining further qualifications in financial education, value chain financing, business model analyses and investments. Successful solutions are incorporated into the portfolio of financial institutions and are permanently available to agricultural representatives. Insurance and digital applications are often part of the approach, e.g. credit default insurance with regard to devastating weather events (drought, flooding, etc.).

The implementation of successful instruments on a broad scale and their integration into national transformation processes requires that the political management and coordination of the processes lies with the central actors in the partner countries. This should take place at continental, national and local level and focus on the interaction between these levels. Bilateral and multilateral development cooperation can support these processes, but must adapt its approaches to the changing requirements of the partner countries. 

The declaration submitted by the conference participants to AUDA-NEPAD focuses on five points: 

1. a strategy to promote agricultural and food systems that combines public and private com-mitment to provide affordable financial services and products based on digital solutions
2. improved regulatory frameworks that protect the rights and interests of producers and con-sumers, especially women and young people 
3. increasing sustainable agricultural productivity and developing financial products tailored to the different needs of the agri-food value chains, including climate-sensitive and green finan-cial products for investments in processing, storage and transport infrastructure.  
4. capacity building for agricultural enterprises and financial institutions
5. cushioning financial risks by promoting the necessary digital infrastructure, using state-subsidised instruments for refinancing and providing loan guarantees and insurance to miti-gate risks 

Agriculture is still the most important economic sector in most African countries. As Kofi Annan has repeatedly emphasised, the financing of smaller farms in particular is the only chance for large sections of the population to overcome hunger and poverty. This will not be possible in the future without state support. However, the participants at the conference in Berlin proposed innovative approaches and instruments with which state and private African actors can improve their cooperation and discussed what role a change in development cooperation can play in the future.       
 

Thérèse Coulidiati, External Relations Officer of the National Federation of Women Weavers of Burkina Faso (FENATI/BF): Improved access to finance and the reorganisation of agricultural and food systems empower women and girls. Improved access to finance and the transformation of agricultural and food systems empower women and girls in Burkina Faso by improving their technical skills and self-reliance and generating income, while reducing unemployment and crime and increasing local productivity and consumption. Photo: © Reinaldo Coddou H.

Mtalika Khumbo, Director of Capital Markets & Microfinance Supervision at the Reserve Bank of Malawi: Agricultural entrepreneurs should have access to credit at low cost. Malawi being an agrarian economy, through the Kampala Declaration, we want to encourage investment and financing through the provision of affordable credit and financing to lending financial institutions at preferential or reduced lending rates so that agribusiness entrepreneurs can access credit at a lower cost. Photo: © Reinaldo Coddou H.

Dr Andreas Schaumayer, Head of Division 123, German Federal Ministry for Economic Cooperation and Development: Access to agricultural financing and secure land rights is key to improving productivity and food security in Africa. Access to agricultural financing and secure land rights is key to improving productivity and food security in Africa. However, it is the responsibility of the governments, private sectors and civil societies of the African partner countries to steer, advance and broaden this process politically. Germany remains a reliable partner in this regard. Photo: © Reinaldo Coddou H.

Authors: Birte Brecht-Drouart and Jörg Schindler, GIZ