By Abbas Nazil
Africa’s agricultural sector requires billions of dollars in new investment to close a massive financing gap that continues to limit productivity and growth across the continent.
Experts say agriculture employs about half of Africa’s workforce and remains a central pillar of many national economies, yet the sector receives less than five percent of total commercial lending despite its large contribution to gross domestic product.
According to an analysis by the Milken Institute, Africa faces an annual agricultural financing gap estimated between $75 billion and $200 billion, highlighting the urgent need for new financing models capable of mobilizing large-scale capital.
The report, authored by British A. Robinson and Cory O’Hara, argues that traditional donor funding for African agriculture has declined in recent years while many governments are constrained by rising debt obligations that limit their ability to expand investment in the sector.
As a result, the continent must increasingly turn to innovative domestic and international financing mechanisms capable of unlocking billions of dollars in capital to support agricultural transformation and food security.
The report highlights six scalable financing opportunities that could help close the gap and accelerate agricultural development across Africa.
One of the proposed solutions is the use of debt-for-food security swaps, an approach inspired by debt-for-nature agreements that have gained global traction in recent years.
Such arrangements allow countries to restructure portions of their sovereign debt while redirecting savings toward agricultural investment, potentially generating hundreds of millions of dollars in funding over time.
The model has already demonstrated potential through recent transactions supported by the U.S. International Development Finance Corporation, including a $500 million debt swap completed in Gabon in 2023 and a proposed $1 billion debt-for-food security agreement involving Kenya.
Another major opportunity lies in securitizing agricultural and small business loan portfolios held by African banks and microfinance institutions.
By packaging performing loans into investment vehicles, banks can free up capital to extend new credit while attracting institutional investors interested in stable financial returns.
Examples of this model have already emerged in Côte d’Ivoire and Benin through securitization deals involving NSIA Banque with support from institutions such as the International Finance Corporation and the British International Investment.
Similarly, a $156 million securitization of solar energy receivables by Sun King demonstrated investor appetite for innovative financing structures that could also be adapted to agriculture-related services such as solar irrigation and mechanized farming equipment.
Commodity-linked bonds and syndicated loans represent another pathway for mobilizing capital, particularly in countries with strong export revenues from products such as cocoa, coffee, tea and cashew nuts.
These export earnings can be used as collateral to support large-scale financing initiatives that benefit farmer cooperatives and agricultural value chains while expanding processing capacity and promoting climate-resilient crop production.
The report also points to the growing influence of sovereign wealth funds across Africa, which collectively manage more than $100 billion in assets and could play a major role as anchor investors in large agricultural projects.
A notable example is the $2.5 billion fertilizer project involving the Dangote Group and Ethiopia Investment Holdings in Ethiopia.
Such partnerships could help finance critical infrastructure including fertilizer production, seed manufacturing, irrigation systems, cold storage facilities and agro-processing industries.
Guarantees are also identified as powerful tools for mobilizing investment because they reduce financial risk and encourage banks to lend to agricultural businesses that might otherwise struggle to access credit.
For instance, Nigeria’s Nigeria Incentive-Based Risk Sharing System for Agricultural Lending has already demonstrated how credit guarantees can unlock agricultural financing, guaranteeing more than $69 million in loans in 2025 alone.
Finally, the report highlights the potential of “fund of funds” investment platforms that pool capital from donors and institutional investors to finance multiple agricultural funds and projects across different countries.
By diversifying risk and providing credit protections, such platforms can attract pension funds, insurance companies and other institutional investors seeking long-term returns.
Ultimately, the authors argue that Africa’s agricultural financing challenge cannot be solved through small-scale projects or traditional donor aid alone.
Instead, the continent must adopt large, market-driven financial structures capable of mobilizing billions of dollars to support farmers, strengthen food systems and improve livelihoods for hundreds of millions of people who depend on agriculture.