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The last decade has seen increasing recognition by policymakers, capital providers, and finance practitioners of the vital role played by agricultural small- and medium-sized enterprises (agri-SMEs) in agriculture and food systems in developing countries, as well as their key challenge of limited access to finance.

In sub-Saharan Africa and Southeast Asia, there is an estimated USD 160 billion demand for financing by ~220,000 agri-SMEs. However, we estimate that only USD 54 billion (~34%) is currently being met through formal finance channels—leaving an annual financing gap of USD 106 billion.

These headline estimates are large, but reflect in numbers what most practitioners have experienced through working with agri-SMEs. Digging beyond numbers, our new State of the Sector report with CASA introduces a more specific view of where the market for agri-SME finance is (and isn’t) clearing.

To add new perspective, this report breaks down the market in a more comprehensive and holistic way to show where finance is specifically flowing, via specific types of products from specific types of funders to specific types of agri-SMEs. The report also presents four long-term change priorities that we see as crucial to systematically closing the USD 106 billion agri-SME financing gap over time.

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In 2018, ISF Advisors, in partnership with the Syngenta Foundation, published Protecting Growing Prosperity: Agricultural Insurance in the Developing World. Alongside the release of that report, more than 100 industry stakeholders convened to consider solutions for maximizing the uptake and impact of insurance for smallholder farming households. However, since that time, the climate crisis has rapidly escalated and the disruptive effects of the COVID-19 pandemic have shifted market dynamics for smallholder farmers. These trends called for a new convening and reflection process for the sector. 

To that end, this 2022 State of the Sector update was commissioned by a new partnership of donors—including the Bill and Melinda Gates Foundation, Syngenta Foundation, FSD Africa, and Swiss Re Foundation—and written by ISF Advisors with support from the Microinsurance Network. The findings of this report were shared and debated in a virtual industry convening of over 130 stakeholders in January 2022. Key ideas and reactions from these discussions have been captured in this report, which sets out to: 

  • Take stock of the current state of agri-insurance for smallholder households, distilling what has changed in the sector since 2018; 
  • Introduce new ways of thinking about the sector in the form of four deep dives; and 
  • Propose a set of priority areas to guide work over the next 5 years. 

We hope that this research will continue to support the insights, partnerships and investments needed to respond to the climate crisis, with smallholder farmers at the center of the action agenda. 

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