The missing piece in Africa’s climate finance push may be the financing model
Africa’s climate finance gap is usually discussed as a shortage of capital for adaptation, renewable energy and resilient food systems. But separate meetings in Lagos and Kigali this week point to another obstacle: money does not always reach farmers and businesses in a form that reflects how they earn, borrow and manage risk.
At the Africa Inclusive Climate Finance Conference in Lagos, financial-sector leaders called for greater use of adaptation finance, blended finance, insurance and risk-sharing to protect farmers and small businesses from climate shocks. In Kigali, participants at the Climate Finance Nexus Forum examined how financing models could make existing climate solutions more investable for agricultural enterprises.
The two gatherings were organised separately, but the common thread is difficult to miss. Africa has technologies and practical interventions that can improve resilience; the harder task is building financial structures that allow those investments to reach the people who need them.
Adaptation is a large financing opportunity
Kola Masha, Managing Director of Babban Gona, put the potential for climate-adaptation financing across Africa at about $200 billion. He argued that financial institutions should move beyond treating agricultural lending as inherently too risky and finance practical measures that help farmers withstand climate shocks.
Irrigation is one example. Masha said only about 6 per cent of Africa’s farmland is irrigated, compared with about 37 per cent in Asia. Better access to irrigation, alongside appropriate seeds, planting practices and soil management, can reduce farmers’ exposure to drought and other climate-related disruptions.
His own experience was offered as evidence that financing smallholder agriculture can work when the model is properly structured. Babban Gona has cumulatively served more than 500,000 smallholder farmers, deployed more than $250 million in financing and recorded a reported 99 per cent repayment rate, according to Masha.
That matters because perceptions of agricultural risk can become self-reinforcing. When farmers receive little financing, they have fewer opportunities to invest in irrigation, inputs, equipment or other measures that would make their businesses more productive and resilient. Low investment then reinforces the view that agricultural borrowers are too risky.
Climate finance has to reach beyond large projects
Peter Simon, Chief Executive Officer of the World Savings and Retail Banking Institute (WSBI), said more than 80 per cent of Nigerian farmers are smallholders who account for about 90 per cent of the country’s food production. He also said four out of five smallholder farmers are financially vulnerable to the consequences of climate change.
Those figures illustrate why climate finance cannot be judged only by the size of the projects it funds. Large renewable-energy and infrastructure investments can absorb substantial amounts of capital, but the resilience of food systems also depends on millions of smaller businesses and farming households.
WSBI and LAPO Microfinance Bank’s climate-adaptation credit pilot, supported by development partners, has reached about 20,000 smallholder farmers and 5,000 MSMEs, Simon said. The programme combines finance with capacity building, climate-risk assessment tools and lending approaches tailored to women smallholder farmers.
The model points towards a broader definition of climate finance, one that includes the relatively modest investments that can determine whether a farmer loses an entire season’s income or remains productive after a climate shock.
The risk cannot sit entirely with the borrower
There is a straightforward reason banks can hesitate to lend for agricultural adaptation. Weather can affect production, market prices can change, infrastructure can fail and businesses can lose income just when loan repayments are due.
Angela Omeiza, ESG Board Chairperson at LAPO Microfinance Bank, argued that this makes insurance and other risk-sharing mechanisms an important part of financial inclusion. A farmer who borrows to buy livestock, crops or equipment can see those assets destroyed by a drought or flood, leaving the borrower with the debt even after the productive asset has disappeared.
That makes the design of the financial product as important as the availability of credit.
Omeiza called for financial institutions, insurers, governments, development partners, technology companies, climate experts and investors to share risks. She also argued that products should reflect women’s actual financial circumstances rather than expecting women borrowers to fit existing products.
The same principle applies to digital finance. Technology can make credit cheaper to distribute and improve access to financial services, but it cannot compensate for a loan whose repayment structure ignores the risks facing the borrower.
Kigali offers a model for making climate investments bankable
The discussion in Kigali approached the problem from the other side: how can an investment in a climate solution become attractive enough for commercial finance?
At the Climate Finance Nexus Forum, convened by Heifer International during the Africa Food Systems Forum, participants examined financing for agricultural technologies including solar irrigation, renewable energy for cooling and processing, and improved water management.
A dairy project in Uganda provided a practical example. At Migina Milk Collection Centre, solar-powered cooling has been associated with the elimination of milk losses. The centre now chills 197,321 litres of milk each month and has recorded a 22.6 per cent increase in milk suppliers, according to information presented at the forum.
The important feature of the project is the network around the technology. The cooperative, technology provider, milk processor, commercial finance and insurance are brought together, while Heifer International provides technical and operational support.
That structure changes the investment proposition. Solar equipment on its own is simply an asset that requires financing. Integrated into a functioning dairy business, it can help reduce losses, improve operations and create stronger conditions for commercial lending.
Concessional money can help unlock commercial capital
Safia Boly, Senior Vice President for Africa at Heifer International, argued that climate finance needs to reach farmers and businesses at the “first mile”, where it can become usable credit rather than remain concentrated in grant-funded projects.
Her argument also speaks to the role of concessional capital. Development funding can be more effective when it absorbs part of the risk that prevents commercial lenders from entering a market, rather than simply paying for an individual piece of equipment.
Guarantees, insurance, technical assistance and blended-finance structures can all play that role. If they reduce enough of the uncertainty around an investment, banks and other private investors can provide a larger share of the capital.
The objective is therefore bigger than financing one solar cooling system or one irrigation project. It is to develop a structure that can be repeated across hundreds or thousands of similar businesses.
Kenya faces the same test
The issue is relevant to Kenya as the country’s financial sector builds its capacity for sustainable investment.
The Kenya Bankers Association and the Global Green Growth Institute have established a five-year cooperation framework covering sustainable finance, green investment and inclusive green growth. The partnership provides an institutional platform for strengthening the financial sector’s role in mobilising capital for sustainable development.
But the experience discussed in Lagos and Kigali raises a practical question for Kenya: what happens when green finance reaches the borrower?
A bank can establish a sustainable-finance framework, but a farmer seeking irrigation finance still has to deal with repayment schedules, collateral requirements, climate risks and uncertain income. A small agro-processor investing in solar power has to demonstrate that the expected savings and revenue can support the loan.
That is where guarantees, insurance, blended finance, project preparation and portfolio-based lending can become important. A single small agricultural enterprise may look difficult to finance; a properly structured group of similar businesses with risk-sharing mechanisms can present a different proposition to a commercial lender.
The next step is replication
The strongest message from the two meetings is that Africa does not have to wait for entirely new climate technologies before financing adaptation. Many of the interventions needed by farmers are already familiar: irrigation, better seeds, improved soil management, cold storage, renewable energy and more efficient processing.
The financing architecture around those investments is where much of the work remains.
Uganda’s dairy example shows how technology, insurance, markets and commercial finance can be connected around one productive enterprise. The Lagos discussions show why that model also needs to account for the realities of smallholder farmers, women borrowers and MSMEs, whose exposure to climate risk can be high even when the amount they need to borrow is relatively small.
For governments and development institutions, the challenge is to use public and concessional capital where it can reduce risk and unlock private investment. For banks and insurers, it is to build products around agricultural cash flows and climate exposure rather than treating those factors as reasons to stay away.
The measure of Africa’s climate-finance progress will ultimately be found beyond conference rooms. It will be whether a farmer can obtain affordable financing to irrigate a field before drought destroys a harvest, whether a dairy cooperative can finance reliable cooling, and whether a small business can survive a climate shock without losing the assets that support its loan repayment.
That is the point at which climate finance becomes adaptation finance in practice.
Real ESG impact doesn’t happen in panels alone, it happens in the rooms where financiers, operators, and policymakers actually align. Our GreenShift Forum 2026 cuts the noise, bringing together the people rewiring Africa’s sustainability and energy frameworks for one focused day in Nairobi. Secure your seat.
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