The missing link: How financing African agribusinesses transforms outcomes for millions of smallholder farmers

“Since taking this loan, I’ve been able to employ young people who assist me in fattening cattle, which has boosted my business and the quality of services I provide and also created opportunities for others in my community,” says a livestock aggregator in Tanzania.

In Kenya, another leader of an agricultural enterprise describes a different but equally important impact: “The loan has helped my business offer credit to farmers so they can rent more land to plant their crops. This has led to an increase in the volume of their produce and, as a result, an increase in their revenue.”

Employment. Credit access. Expanded production. These are what happens when businesses that already serve farming communities get access to the right type of capital they need to run their business properly.

Aceli Africa focuses on mobilising finance for these agricultural SMEs. Working in partnership with Aceli Africa, impact measurement specialists 60 Decibels tracked 656 leaders of agricultural small and medium enterprises across Kenya, Rwanda, Tanzania and Uganda to see what happened when these businesses that form the connective tissue of local food systems finally secured formal financing. We spoke with 6,154 farmers and 229 workers who depend on these businesses. What they told us challenges how the development sector thinks about reaching smallholder farmers at scale. Download the full report here.

The infrastructure hiding in plain sight

These agricultural SMEs occupy a critical but often invisible position in food systems. They aggregate produce from smallholder farmers. They distribute quality inputs that improve yields. They provide transport and storage in areas where infrastructure barely exists. They connect rural producers to urban markets that would otherwise remain out of reach.

Yet despite this essential role, formal lenders have largely overlooked them. They’re considered too risky, too costly to serve, operating in sectors with thin margins and high volatility. For 61% of the SMEs in our research, their recent loans were the first time they had accessed capital above $25,000. More than a third had never borrowed from a formal institution at all.

Despite the essential role of agricultural SMEs, formal lenders have largely overlooked them. They’re considered too risky, too costly to serve, operating in sectors with thin margins and high volatility

The result of this financing gap isn’t just constrained businesses. It is millions of smallholder farmers being cut off from the services and market connections they need to improve their livelihoods.

When capital finally flows

When these mid-tier businesses finally secured financing through Aceli Africa’s incentive model, which makes it economically viable for commercial lenders to serve agricultural SMEs, change happened remarkably quickly.

Nearly 90% of SMEs reported improvements in core operations within months. They purchased equipment they had deferred for years. They expanded storage capacity. They increased the quality and range of inputs they could stock. Two-thirds hired new employees. These were modest numbers per firm, but significant in contexts where formal rural employment is scarce.

What matters most for smallholders: within months of receiving financing, more than three-quarters of these businesses were serving additional farmers. Many introduced entirely new services: storage facilities that reduced post-harvest losses, quality inputs that hadn't been available locally, more reliable connections to higher-value markets.

Rather than building new systems to reach dispersed smallholders, financing the businesses already serving them catalyses benefits that transmit rapidly through rural communities

The farmers confirmed it. Roughly 75% accessed at least one agricultural service for the first time through their SME. Most commonly, this was a market connection that simply had not existed before. Nine in ten reported improvements in their farming practices as a result, particularly through better fertiliser use, pest management, and the adoption of soil or water conservation methods.

This is the efficiency of working through existing infrastructure. Rather than building new systems to reach dispersed smallholders, financing the businesses already serving them catalyses benefits that transmit rapidly through rural communities.

What actually makes financing work

The farmers and SME leaders we spoke with were remarkably clear about what makes financing effective, and what doesn't.

• Speed and timing matter. For agricultural businesses operating on tight seasonal cycles, a loan that takes three months to process can arrive too late to be fully effective. Planting cycles don’t wait. Input purchases happen on fixed schedules. Harvest aggregation requires working capital exactly when produce arrives.

SMEs that received loans within a month reported higher satisfaction than those waiting three months or more, and this appeared to translate into their ability to serve farmers effectively. While it is too early to know if this pattern will hold over time, the feedback from borrowers suggests that processing timelines aligned with agricultural cycles make a difference. Loans that process slowly don't just frustrate borrowers – they risk missing the window where capital can have the greatest impact.

• Support matters as much as capital. The businesses that received post-investment advisory support (basic guidance on financial planning, cash flow management, and growth strategy) didn’t just report higher satisfaction. They expanded faster, hired more workers, and described feeling more confident in their ability to plan for growth.

For farmers, this difference was tangible. SMEs with advisory support were significantly more likely to introduce new services and expand their farmer networks. The data shows a substantial gap in outcomes between businesses that received capital alone versus those that received capital paired with basic business guidance, making a case for lenders to put aside funds for capacity building support.

The boundaries of what finance can do

Four years of listening to farmers, workers and SME leaders also revealed clear limits.

Loans don’t eliminate climate shocks that devastate harvests. They don’t resolve poor rural roads that make transport prohibitively expensive, or build the storage infrastructure that entire regions lack. They don’t change power dynamics in value chains where SMEs and the farmers they serve operate with limited negotiating leverage against larger buyers.

Where finance succeeds, it does so alongside other enabling conditions: infrastructure that supports agricultural commerce, regulatory environments that allow efficient operations, and market structures that reward the investments both SMEs and farmers make.

Remove these conditions, and even well-structured loans struggle to generate sustained impact. Finance is necessary for strengthening food system infrastructure, but it’s not sufficient on its own.

Rethinking how to reach smallholders

The evidence from 656 enterprises, 6,154 farmers, and 229 workers suggests the development sector should fundamentally reconsider its approach to supporting smallholder farmers.

• For lenders: When financing an agricultural SME, processing speed should matter as much as interest rates. A loan that arrives aligned with agricultural seasons is fundamentally more valuable and likely to get repaid. Additionally, data shows that offering post-investment support helps borrowing businesses perform measurably better and serve more farmers.

• For donors and impact funders: The relatively rapid flow of benefits from SME to farmer level suggests that financing agricultural SMEs may be one of the most efficient ways to reach smallholders at scale. Aceli's incentive model (which restructures economics to make commercial lending viable rather than creating parallel direct lending programmes) is an approach worth considering.

• For government agricultural ministries: These mid-tier businesses are essential infrastructure for local food economies and they already exist. Policies and programmes that help them access appropriate financing (and that streamline their operations through better roads, storage facilities and market regulations) multiply benefits across rural communities rapidly. 

Infrastructure worth investing in

The pattern across four years of data is clear: agricultural SMEs aren’t a marginal segment struggling at the edges of food systems. They’re essential infrastructure connecting millions of smallholder farmers to inputs, markets, knowledge and opportunity.

For too long, the development sector has treated them as either too risky to finance or simply invisible. It has focused efforts on direct farmer interventions while overlooking the businesses that serve those farmers every day. 

But appropriately structured catalytic capital can jump-start the agricultural financing journey even for commercial banks. And when appropriately structured capital finally reaches these enterprises, farming and rural communities benefit. When that capital is paired with basic advisory support and delivered on timelines that match agricultural realities, outcomes improve measurably for everyone in the system.

The infrastructure is already there, operating under constrained conditions, serving millions of farmers. The question is whether the development sector can recognise these businesses for what they are

This isn’t overnight transformation. But it is meaningful progress towards more resilient food systems and rural economies. It is progress that reaches the people who need it most, faster than traditional approaches.

The infrastructure is already there, operating under constrained conditions, serving millions of farmers across East Africa and beyond. The question is whether the development sector (and the capital that flows through it) can recognise these businesses for what they are: not charity cases to be cautiously supported, but essential infrastructure worth investing in properly.

The voices of SME leaders like those who received financing through Aceli Africa’s support in Kenya, Rwanda, Tanzania and Uganda make it clear: give them the capital and support to do their jobs, and the benefits don’t stop at their businesses. They flow through to entire communities. Multiply that impact across hundreds of enterprises and thousands of farming communities, and you begin to see what is possible when we finance the infrastructure that has been hiding in plain sight all along.

This article draws on impact data collected by 60 Decibels across Aceli Africa's portfolio from 2020-2024, including surveys with 656 SME leaders, 6,154 farmers, and 229 workers in Kenya, Rwanda, Tanzania, and Uganda. Download the full report here.

Venu Aggarwal is the director for strategic partnerships at social impact measurement and customer intelligence company 60 Decibels. This article was co-authored with Eddah Nang’ole, senior manager, impact and learning at Aceli Africa, where she leads the design and implementation of ESG strategy and MEL frameworks.

Header image: Adobe Stock

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