SMEs Africa

Bridging the Financing Gap: Unlocking the Impact Potential of Agricultural SMEs in Africa

The issue of lack of sufficient access to finance


Investing in African agriculture is critical to achieving the Sustainable Development Goals. Yet while 60-70% of the population in East Africa works in agriculture, it receives less than 10% of commercial bank lending in most countries and as little as 2% in Rwanda.

Small and medium enterprises (SMEs), such as farmer cooperatives and food processors, are especially affected. Agri-SMEs handle over 60% of all food production and trade on the continent and they have the potential to facilitate pathways out of poverty for smallholder farmers and low-skill workers, particularly women and youth.

However, most agri-SMEs fail to realize this potential because they lack sufficient access to finance and the capacity to manage it. The financing gap for agri-SMEs in the “missing middle”– too large for microfinance but unable to access loans from commercial banks – is estimated at $65 billion, or three in four agri-SMEs, across Sub-Saharan Africa.

In the past, limited data on the economics of financing agri-SMEs has made it difficult to identify where the donor or government interventions are required and how they should be designed.


Mobilizing market incentives to unlock SME’s potential


Informed by this data, Aceli Africa is designed as a “market incentive facility” to mobilize $700M in lending to agricultural SMEs in East Africa by 2025 by aligning capital supply and demand.  Aceli helps SMEs unlock financial potential by providing:


  • Portfolio first-loss coverage incentivizes lenders to make more loans that meet impact criteria and are designed to absorb the incremental risk from serving these marginalized borrowers.
  • Origination incentives to lenders compensate them for lower revenues and higher operating costs of making smaller loans to SMEs that would not otherwise have access to financing.
  • Impact bonuses in the form of higher first-loss coverage and origination incentives when businesses are a gender inclusive, strengthen food security, or practice climate-smart agriculture.


Aceli Africa will also increase addressable demand among agri-SMEs and bring capital supply and demand into greater alignment through technical assistance to qualify for and manage financing, capacity builing for lenders to adapt their product offering, and innovation investments to promote technological and other business model improvements that will drive down the costs of agri-SME lending.




Author: ACELI Africa

Language: English

Year: 2020

Ecosystem(s): Agricultural Land

Location(s): Africa

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