What were your expectations from the Africa Food Systems Forum in terms of actionable outcomes, and how do you see these discussions influencing future policy and investment decisions in the agricultural sector across Africa? 

I am glad that we are all approaching food systems in a more holistic way. This means we are still working to improve agricultural productivity for small-scale farmers, but with greater clarity and intentionality about a broader set of considerations, such as the criticality of environmental sustainability, the importance of nutrition and dietary diversity, and the role of markets and the private sector.  

It is difficult, however, to draw conclusions about how government policy and investment decisions actually evolve. We know that many countries are falling short of their goals, whether we use the Comprehensive Africa Agricultural Development Programme (CAADP), the Sustainable Development Goals (SDGs), agri-food trade balances, or other indicators. Systemic risks are also increasing from climate change, macro shocks such as COVID-19 and the Ukraine crisis, and rising sovereign debt levels, all of which contributes to more volatility. Thus, our role at Dalberg is helping our partners design programs that offer more resilient, long-term strategies. 

This encompasses a rigorous analysis of evidence for what is working—and there are indeed many examples of this—and then assistance toward their replication and scaling. For example, we have been supporting Aceli Africa for several years. Before the concept was launched, Dalberg helped them conduct the baseline study that shaped the design of their blended finance program for agricultural SMEs. Since then, following their launch through the Global Development Incubator (GDI), we have led in-depth assessments to analyze agricultural lending dynamics and the impact of their incentives on the behavior of financial institutions. 

As a panelist during the “Africa Agriculture Status Report (AASR)” session, what perspectives did you share?  

At the AASR session, I shared Dalberg’s perspective on one of the most pressing challenges for African agricultural SMEs: access to finance. Despite being key drivers of sectoral and economic growth, agricultural SMEs across Africa continue to face significant financing barriers, which remain the most significant constraint to business expansion. Our research shows that, compared to other regions, Africa’s progress in financing for the sector has been slow over the past two decades, even as output and productivity have gradually increased. Reliance on uncertain supply and quality, poor access to markets, insufficient infrastructure, and general difficulties in doing business all make it hard for agricultural SMEs to grow. 

Thus, while it may seem like financial institutions are falling short in serving agricultural SMEs, the reality is more nuanced. These businesses face unique challenges, and the financial sector, in turn, faces difficulties in financing a sector shaped by more unpredictable variables. Compared to other options for deploying capital in Africa, agricultural SMEs typically present higher risk and yield lower returns, which explains the cautiousness around lending or investing in this space. 

During the session, I emphasized that addressing this challenge is not just about calling on financial institutions to do more. This is where solutions like blended finance come in, offering a way to mitigate risk, improve returns, and unlock more financing to the sector. While this perspective is not new, our recent analysis shows that tailored return enhancements incentivize banks to lend, while addressing their concerns about profitability and long-term sustainability, and are an impactful, high-leverage way to approach the challenge.

What insights does our research offer on using blended finance for agricultural SMEs? 

First, the data on blended finance suggests that a lot of it flows into relatively bigger ticket, larger-scale projects. One of our concerns is that financial institutions may be relatively underserved, and this is a missed opportunity. While banks and microfinance institutions may not always seem terribly exciting or innovative, their offerings are most likely to be relevant for serving typical ag-SMEs. They have stronger market reach, and blended finance can have a material impact on their risk-return considerations.  

Second, much of the use of blended finance focuses on credit enhancements through guarantees that reduce risk for lenders and concessional capital which offers below-market rates to incentivize lending. Both mechanisms are important, but we have found that credit enhancements alone often aren’t enough to drive meaningful changes in the behaviors of lending institutions. Guarantees can be uncertain or difficult to access, especially when provided by the public sector, which is why it’s critical to also address the return side of the equation.  Our research showed that by using return enhancements targeted at specific challenges—like supporting the smaller loans that are more likely to be demanded by women-led businesses or informal value chains—lenders could improve their financial outlook while simultaneously addressing key gaps in the agricultural sector. And we are seeing evidence that these behavioral shifts can be lasting, banks are moving down a learning curve, and blended finance can continue to be deployed in a cost-efficient way. 

What significant policy implications were highlighted in the Africa Agriculture Status Report (AASR) that you believe could be valuable for African governments to focus on in supporting food systems transformation?

While this is easier said than done, my view is that governments are more effective when they shift focus away from short-term measures like subsidies or interest rate caps, which are distortionary, and concentrate on building foundational elements of an enabling environment. In the broadest sense, this involves addressing critical issues such as inadequate infrastructure, trade barriers, and corruption. Within the financial sector itself, governments can support financial access by establishing trusted credit reference bureaus and reliable collateral registries, as well as providing clear regulations and a sandbox environment for digital financial services like mobile money. While these may not yield immediate results, they significantly lower the barriers for the financial sector to compete and innovate. 

Reflecting on the discussions at the forum, what do you think are the next critical steps for stakeholders in Africa’s food systems to take in order to effectively implement the ideas and strategies that were proposed? 

In sum, the Africa Food Systems Forum 2024 emphasized the importance of long-term, sustainable financing solutions, like blended finance, that incentivize meaningful behavior shifts in financial institutions. But beyond financing, there’s a pressing need for stronger partnerships and more transparency around what works. Let’s share our data, our learnings, our hits, and our misses. Dalberg remains committed to driving this agenda by helping our partners learn from successes and failures through rigorous evaluations that scale the most impactful interventions.  

This is especially true in blended finance, which is intended to be a bridge—a temporary solution to close a gap. It’s not meant to be a bridge that we over-engineer, over-invest in, or repeatedly rebuild. The same principle applies to many interventions and investments in food systems, and that is a key part of Dalberg’s role with our partners and stakeholders—driving a shared, transparent learning agenda and ensuring we collectively build on it. 

Explore the Africa Agriculture Status Report and our chapter on Catalyzing Financing for Agricultural SME.

To know more about our work in sustainable financing solutions, contact: