A Midterm Update from Kenya and Tanzania
The Finance Gap in African Agriculture: Why It Still Persists
Agriculture remains the backbone of Africa’s economy, yet access to suitable financial products and services for smallholder farmers and their organizations continue to fall short. Farmer organizations and cooperatives face persistent barriers: limited collateral, weak financial records, high interest rates, and governance challenges. Their often-fragmented operations make it difficult to present a unified, bankable profile—an issue that disproportionately affects women and youth.
On the other hand, financial institutions still view agriculture as a high-risk sector. Small transaction sizes, dispersed clients, and high operational costs reduce appetite for lending, while climate variability further increases perceived risk and threatens existing investments.
The AgriGRADE approach responds to these challenges by providing a structured pathway for farmer organizations to “graduate” toward becoming professional, finance-ready, and market-linked entities. It combines standardized assessments (SCOPE RAPID, SCOPE BASIC, and SCOPE Pro), targeted technical assistance, and business intelligence tools to coordinate support and track progress objectively.
Within this framework, Oikocredit is working through AgriGRADE projects in Kenya and Tanzania to strengthen financial management, governance, and business planning among farmer organizations. This paper distills key lessons from field assessments, training interventions, and engagement with financial institutions, offering practical insights into what it takes to unlock finance and build resilient, investment-ready cooperatives.
What the Data Says: Financial Management Trends from 289 Assessments
As part of the AgriGRADE framework, 289 RAPID scans were conducted among farmer organizations to assess their overall maturity and financial potential. Oikocredit actively participated in these scans, as well as in the subsequent 91 in-depth SCOPE Basic and Pro assessments. These exercises aimed to build a comprehensive understanding of each organization’s structure, governance, financial management, funding needs, and existing partnerships with financial institutions.
The assessments revealed an aggregate credit demand of approximately EUR 3.5 million across the 91 organizations. However, they also highlighted key financial management weaknesses: inadequate internal controls, limited financial reporting systems, overreliance on a few key individuals, and a lack of succession planning. In a few cases, signs of financial mismanagement were also observed.
To address these gaps and enhance the investability of farmer organizations, Oikocredit trained AgriGRADE’s Business Development Service (BDS) providers on critical areas of financial management and governance, including:
- Internal control systems and cash reconciliations
- Stock movement and approval processes for cash handling
- Roles and responsibilities of board members
- Review and approval of financial reports
- Break-even and margin analysis
Oikocredit also helped review and refine the BDS training curriculum to ensure these issues were systematically addressed and participated directly in the training sessions to strengthen delivery quality. A follow-up evaluation will assess the extent to which the farmer organisations have progressed toward greater financial maturity and investment readiness
Quality and Viability of Cooperatives’ Business Plans
A well-developed business plan is a cornerstone of financial readiness. It not only demonstrates a farmer organization’s (FO’s) strategic direction but also serves as an operational guide that aligns goals, resources, and market opportunities. For financiers, it is a key indicator of bankability, providing confidence that the organization can generate consistent returns and manage credit responsibly.
Findings from the AgriGRADE assessments revealed that most farmer organizations lacked written business plans, significantly limiting their ability to secure financing from formal lenders. Without a plan, many FOs struggled to articulate market opportunities, project cash flows, or design strategies that ensure long-term sustainability.
Recognizing this gap, Oikocredit made business plan development an integral part of the AgriGRADE graduation process. By aligning business plans with both market opportunities and financial institution requirements, AgriGRADE ensures that technical assistance is data-driven and directly connected to each organization’s performance profile.
BDS Training Session in Tanzania
To build this capacity, Oikocredit trained AgriGRADE’s Business Development Service (BDS) providers on the preparation of sound business plans—covering revenue forecasting, resource allocation, and financial projection techniques. These plans enable farmer organizations to better manage resources, track profitability, and improve overall sustainability.
Several cooperatives have already benefited from this intervention, including Arusha Cooperative Union Limited, Amberico Agricultural Marketing Cooperative Society (AMCOS), Gallapo AMCOS, Mwendamtitu Scheme, and Mbuyuni Farmers’ Association, among others. Financial institutions now express greater confidence in FOs that present credible business plans, as they provide a transparent roadmap to profitability and demonstrate repayment capacity. Strong planning also enables cooperative managers and boards to make informed decisions and monitor progress against agreed Key Performance Indicators.
Strengths and Bottlenecks in Financial Readiness
Across AgriGRADE’s implementation in Kenya and Tanzania, several trends have emerged regarding the financial readiness of farmer organizations (FOs). The agricultural finance ecosystem is diverse, including commercial banks, microfinance institutions (MFIs), savings and credit cooperatives (SACCOs), insurance providers, fintech firms, mobile money platforms, and village savings and loan associations (VSLAs). Despite this wide range of actors, many farmer organizations remain unable to access formal credit.
Several constraints continue to limit progress. On the demand side, farmer organizations face exposure to systemic risks such as climate shocks and disease outbreaks, as well as market risks like price volatility and uneven cash flows. Weak governance, limited management capacity, and poor farm-level practices further erode lender confidence. On the supply side, financial institutions often view smallholder agriculture as risky and unprofitable, citing high operational costs and policy uncertainties. Regulatory barriers and ad-hoc government interventions add further complexity.
Within the AgriGRADE framework, strengthening financial readiness means improving both internal management systems and external linkages with financial institutions. Through structured assessments and data-driven tools, AgriGRADE provides financiers like Oikocredit with pre–due diligence insights that help bridge the gap between farmer organizations and financiers. These insights inform targeted technical assistance and help align the expectations of both parties.
This engagement also creates opportunities for co-creation of financial products. Financial institutions can design loan instruments that match FOs’ specific financing needs and seasonal cash-flow cycles. Loan officers, in turn, are equipped with the skills to assess cooperative financials more effectively through improved cash flow analysis, crop-based repayment modelling, and tailored covenant design. Together, these efforts move the sector toward a more structured and trust-based model of agricultural finance.
What Defines a Sound Business Plan from a Financier’s Perspective
From a financier’s standpoint, a sound business plan goes beyond demonstrating profitability. It must also prove financial viability, social impact, and environmental responsibility the three pillars of sustainable investment.
A credible business plan should clearly outline:
- How revenues will be generated and funds utilized;
- The risks involved and strategies for mitigation;
- Expected outcomes for low-income households, women, and youth;
- Compliance with best practices and sector standards.
In recent years, financiers have increasingly evaluated farmer organizations using Environmental, Social, and Governance (ESG) criteria. These assess how an organization manages its environmental footprint, treats workers and communities, promotes gender and youth inclusion, ensures ethical conduct, and complies with legal frameworks.
Finally, a strong business plan demonstrates effective governance and leadership capacity. It should highlight the skills and qualifications of both management and the board, showcasing their ability to execute the plan and ensure accountability. Together, these elements give financiers confidence not only in the farmer organization’s profitability, but also in its long-term sustainability and resilience.
Scaling Smart Finance-Readiness Across Agriculture
Financial inclusion is essential for farmer organizations to achieve both economic and social impact. Yet meaningful inclusion depends on more than access to credit it requires professional, data-driven, and investment-ready organizations that can engage confidently with financial institutions.
Through the AgriGRADE approach, and with the active involvement of partners such as Oikocredit, farmer organizations are being supported to strengthen their governance, financial management, and business planning. By linking standardized assessments, tailored technical assistance, and financial matchmaking in one coordinated system, AgriGRADE provides a practical pathway toward measurable progress in financial readiness.
Looking ahead, this integrated model has the potential to standardize how readiness for finance is defined and improved across countries and value chains. The experiences gained from Kenya and Tanzania will act as valuable learning laboratories for refining our tools, training curricula, and engagement models. As the approach scales, AgriGRADE aims to establish a benchmark for data-driven, inclusive agricultural finance empowering cooperatives and farmer organizations to graduate toward sustained access to markets and capital.