Putting Food on the Balance Sheet 2025

Commercial capital Farmer/cooperativeDerisking Catalytic capitalDirect farmer lending, derisked by catalytic capital Pioneering agricultural banks have leveraged catalytic funding to improve the business case of direct farmer loans. Given the close relationship of agricultural banks with their customers, these models can drive impact rapidly without significant investments, changes to operating models or the need for new capabilities. Examples include Rabobank and CoBank, mission-driven banks operating under cooperative structures. Unlike typical commercial banks, they benefit from member-focused ownership models and often access credit guarantees and risk-sharing tools, allowing them to finance higher- risk sectors like agriculture. Replicating this model is challenging for commercial banks due to shareholder obligations. However, catalytic capital can be used to balance commercial capital returns. Aceli Africa is a market catalyst stimulating commercial lending to agricultural small-and-medium enterprises (SMEs) by offering financial incentives to local direct-to-farmer lenders extending their balance sheet. For each qualifying loan, Aceli Africa deposits a percentage of the loan value into a reserve account that is available to cover the first losses across the lender’s portfolio. Aceli Africa also offers an origination incentive to defray the transaction costs of serving higher-risk businesses. Loans to first- time borrowers and those that meet criteria related to women, youth economic empowerment, food security and environmental resilience are rewarded with greater financial incentives. As of March 2025, Aceli Africa has provided $31 million in donor-funded incentives to mobilize $300 million commercial capital (9.4x leverage) via 3,500 loans, reaching 1.5 million smallholder farmers. The goal is to unlock $1.6 billion in lending by 2030 and improve the livelihoods of over 5 million smallholder farmers.18 This model has proven highly effective in the African context. However, it relies on significant coordination and the involvement of multiple system actors, including catalytic capital providers. Its scalability in other regions, however, remains to be proven.Model 5 Financing model 5: Direct farmer lending, derisked by catalytic capital FIGURE 9 Catalytic capital First-loss coverage grant (for loans $15k – $1.75m) Origination incentives (for loans $15k – $500k)Governmental agencies Technical AssistanceLoans RepaymentImpact bonus Agri-SMEs Grants Local service providersCommercial capital, finance delivery and services Direct de-risking for capital providers Tranching First-loss coverage Guarantee Interest payment Insurance premium payment Impact bonus/incentiveIndirect de-risking through demand commitments Offtake agreements Ecosystem outcome monetization Price premiumTechnical assistance/training Grace periodEnablers ESG rating Value chain network Provision of capital Provision of non-financial services Philanthropists Source: Aceli Africa Case Study (Convergence, Nov 2020), Aceli Africa learning report: year 3, Aceli Africa website.