Credit for coffee farmers needs urgent attention, writes Dr Morris Akiri, CABI's executive director for Africa: larger producers can secure finance, but 'last-mile' smallholders in remote rural areas are systematically excluded from banking even though they underpin a multi-billion-dollar global industry. New research in five major African coffee-producing countries — Cameroon, Côte d'Ivoire, Ethiopia, Kenya and Uganda — finds that credit meets less than a quarter of smallholders' needs and that commercial banks contribute a modest 7% of formal agricultural credit, with women and young people at the greatest disadvantage.

These are the 'missing middle': too large for microfinance, too small for commercial banks, yet a substantial share of a sector that supports over 15 million livelihoods in Ethiopia and 1.8 million in Uganda. Interviews with more than 100 people across the continent point to three linked failures — prohibitive interest rates; repayment schedules that demand the same monthly instalment all year rather than grace periods over the growing and harvest seasons; and collateral rules that require formal land titles, automatically disqualifying women and youth, who own less than 15% of agricultural land while providing up to 70% of production labour.

Shut out of formal banking, women are pushed into exploitative informal trader networks or out of coffee altogether, and young people without land cannot absorb high rates or rigid timelines and may abandon the family farm for urban informal work. By applying standard criteria that ignore customary land ownership and seasonal income, the paper argues, banks reinforce inequality and lock out the entrepreneurs the sector needs to modernise.

Changed models deliver: gender-inclusive partial credit guarantees in Ethiopia, which cover part of the default risk, have helped more women and young farmers qualify for formal loans; three-way lending agreements pioneered by Root Capital in Rwanda, Tanzania and Uganda use a buyer's future purchase commitment as security instead of land; and legal reforms recognising movable assets — livestock, machinery, stored crops — as collateral have unlocked more than US$3 billion in loans in Ghana and US$230 million in Liberia, with women entrepreneurs receiving around 30% of that financing.

The paper calls on banks to use age- and gender-disaggregated data to design flexible collateral and tailored products, on African governments to strengthen online movable-collateral registries on the Ghana and Liberia model and to reform customary land laws that bar women from ownership, and on the industry to treat smallholders not as too risky but as under-served — 'viable business partners in a multi-billion-dollar global industry'. The analysis is set out in CABI Working Paper 38, 'Enhancing credit access for missing middle and last-mile borrowers in African coffee value chains'.

Source: CABI