When the Economics Don’t Work: Realigning Capital Markets with Development Impact

Published 08 October 2020

In 2021, a woman-owned coffee enterprise in Rwanda received its first formal loan of $100,000 from a lender that was supported by Aceli’s financial incentives.[1] The loan enabled the entrepreneur to improve production on her own coffee farm, purchase from 1,425 farmers (including 537 women) and employ nine workers (six women). Within a year, the business increased revenues by 60%, more than doubled its coffee purchases from farmers, repaid its loan, and accessed a new loan of $150,000. 

Meanwhile, a maize aggregator in Rwanda also received its first formal loan in 2021 of $30,000. While this business is owned by a male entrepreneur, it creates economic opportunities for numerous women employees (six of its 15 full-time workers are women) and farmer suppliers (101 of the 123 smallholder farmers selling to the enterprise are women).

Much of the dialogue related to “gender inclusive” or “gender smart” investing is focused on facilitating access to finance for women entrepreneurs. Aceli’s experience mobilizing lending for small- and medium-enterprises (SMEs) in the agriculture sector points to the need for a “both / and” strategy both increasing the number of women-owned agricultural SMEs that are able to access finance and recognizing that male-owned enterprises have an important role to play in women’s economic empowerment. As Aceli enters our third year of operations, we are drawing upon recent analysis of the loans supported by our incentives to understand the various ways in which women benefit from access to finance for agri-SMEs and how we can optimize our incentives, technical assistance, and market facilitation to promote economic opportunities for women entrepreneurs who have struggled to access finance as well as for the large numbers of, managers, employees, and farmers who can benefit from agricultural SMEs, regardless of the entrepreneur’s sex.

Data findings from two years of incentivizing gender inclusive lending


Aceli is a market incentive designed to address the high risks and transaction costs of lending to small- and medium-enterprises (SMEs) in the agriculture sector. By 2025, we aim to mobilize $600M in capital by 2025 to 1,500 underserved agricultural SMEs in East Africa. Our incentives steer lenders to seek out and serve the highest impact SMEs with a particular focus on women-led businesses or SMEs that otherwise meet the 2X Challenge Criteria [2] for gender inclusion based on the composition of their leadership teams, board members, employees, or farmer suppliers.

In this blog and a forthcoming learning brief, we share learning related to gender inclusion from Aceli’s work over the past two years with 25 lenders in Kenya, Rwanda, Tanzania, and Uganda. With support from USAID INVEST, we analyzed 467 loans registered for Aceli incentives from the program’s launch in September 2020 thru June 30, 2022.[3]

Reach. The enterprises receiving Aceli-supported loans collectively employ 9.8k workers, including 4k women (41%), and create market access for 427k smallholder farmers, including 178k women (42%).

Above target. At launch, Aceli set a goal of 30% of loans meeting the 2X criteria in line with the threshold established by 2X for a “gender inclusive portfolio.” To date, 68% of Aceli-supported loans (319 of 467) meet the 2X criteria.

Gender inclusion vs. women-owned businesses. The majority of Aceli’s supported loans that meet the 2X criteria do so based on: women employees (43% of total loans), senior leadership (31%), board members (22%), or farmer suppliers (21%). Only 8% of Aceli-supported loans go to businesses that are fully or majority owned by women. 

Gender and access to finance. SMEs that are gender inclusive have higher revenues and receive larger loans than non-gender inclusive SMEs. By contrast, women-owned SMEs (100% or majority) have significantly lower revenues ($376k v. $865k) and receive smaller loans compared to male-owned SMEs ($98k v. $137k). Interestingly, women-owned businesses receive larger loans relative to their annual revenues compared to male-owned businesses (46% v. 38%).[4] 

Women-owned businesses are more gender-balanced. Women-owned businesses hire a slightly higher percentage of women employees (41% v. 33%) and are significantly more gender-balanced in senior leadership (57% of leadership roles held by women v. 23%) and in their boards (62% v. 16%) than male-owned businesses. However, both women- and male-owned businesses purchase from a similar percentage of women farmers (44% for both groups).

Differential treatment? Women- and male-owned businesses tend to receive a similar percentage of the loan amount they request (~89% across ownership categories) and interest rates are comparable across Kenya, Rwanda, and Tanzania, though there appear to be some differences in Uganda.

What’s next? The gap between the large proportion of enterprises that meet the 2X criteria and the small percentage of women-owned SMEs has prompted us to reassess how Aceli promotes economic opportunities for women. Over the past six months, we’ve:

  • Revised our gender impact bonus to offer a “double bonus” for loans to SMEs that meet multiple criteria across women’s leadership (i.e., ownership, management, board) and participation as employees and farmer suppliers;
  • Set targets and developed a strategy for reaching more women-owned SMEs through our technical assistance (currently 27% of SMEs accessing Aceli-supported technical assistance are women-owned and we’ve set a target of 40% by 2025);
  • Offered a series of workshops on gender lens investing for 17 lenders and deeper advisory engagements with two lenders in partnership with Value for Women (VfW);
  • Launched a matchmaking service to connect SMEs graduating from Aceli’s technical assistance program to lenders; and 
  • Begun exploring with VfW how to support continuous improvement on gender inclusion for SMEs (eg, in their hiring and human resources practices). 

Informed by learning with our partners and across the growing sector of practitioners testing and refining approaches to gender lens investing, Aceli will continue to evolve our product offering to address deeply entrenched barriers for women entrepreneurs and women’s economic empowerment more broadly. Our upcoming learning brief will go into more detail on Aceli’s learning to date and our thinking on this topic. 

About Aceli

Aceli Africa (Aceli) is a market incentive facility that seeks to bridge the gap between capital supply and demand for agricultural SMEs and unlock their growth and impact potential. Aceli raises grant funding from public and philanthropic donors and offers a combination of financial incentives for lenders and technical assistance for both SMEs and lenders. More information on Aceli’s work promoting gender inclusion in the agri-finance sector is available in a companion blog co-written with Value for Women, case studies detailing two gender lens advisory engagements by VfW with Aceli lending partners, and our forthcoming gender inclusion learning brief. 


[1] Aceli’s incentives share in the risk and defray the transaction costs so the lender can cover its costs; an impact bonus is included to motivate lenders to seek out and serve gender inclusive businesses. Read more about Aceli’s incentives here.

[2] The 2X Challenge outlines and defines an international standard / set of criteria for gender inclusive portfolios within Development Finance Institutions to increase private sector investments in women around the globe.

[3] Aceli is a market incentive facility designed to increase lending to high-impact agricultural SMEs. Launched in 2020, Aceli is currently working in Kenya, Rwanda, Tanzania, and Uganda with 27 financial institution partners, including commercial banks and non-bank financial institutions domiciled in the region as well as international impact investors. Participating lenders are eligible for financial incentives that are tiered to offer lenders larger rewards for loans registered with Aceli that are to higher impact SMEs as described further here.

[4] The disparity in loan size for gender inclusive SMEs relative to non-gender inclusive SMEs may be partly linked to value chain as a higher proportion of the former (40%) operate in formal value chains (eg, export crops such as coffee as opposed to informal value chains for staple crops) than the latter (24%). However, women-owned SMEs have a similar distribution by value chain than their male-owned counterparts so other factors account for the differences in enterprise size.

By Andrew Ahiaku


It was a good year. The rains came early to my farming community of Atidzive in the Akatsi-South District of Ghana, and we ploughed the fields for planting. Then came a truck with certified seeds (not the lower yielding ones we had saved from the last harvest) and bags of fertilizer (which we usually couldn’t afford). The farmers had formed groups and received loans for the farming season. The interest rate was high but the farmers were happy for the support from the district Community and Rural Bank.

My auntie, who was the Matriarch of the family, used her loan to hire additional farm hands for weeding. The harvest was so big that she had to hire extra help to carry it to the storage building. I remember being exhausted and sore from carrying so many 15 kg sized-bags of maize, but also jubilant – for the first time, my entire boarding school fees were paid at the beginning of the term! I was known for late payment of fees when I lost my Dad in at age 12. All the farmers in the village paid their loans on schedule. My auntie bought a new metal roof for her house, we got new clothes, and Christmas was festive with presents for all the kids. Around our village of a few hundred families, several families were able to send their children to secondary school that year, which was a big deal – that was the generation that became teachers and police officers.

The next season, my auntie leased additional land in anticipation of a higher loan amount. We cleared the farm early and waited for the bank to approve her loan. She stopped by the bank every week she was in the district town on a market day; they kept assuring her that approval would eventually come. A month later, after she had missed the best time to plant, she was told the bank won’t be giving loans – they had exceeded their limit or something of the sort. My young mind didn’t understand what that meant. Why would a bank refuse a client a loan when she has met her obligations on an earlier one? If they knew she won’t get the loan, why did they encourage her to lease more land?

That season was like most before and since. My auntie and the other farmers planted on small plots with the seed they had saved up from the previous harvest. They couldn’t afford the good seed or fertilizer, couldn’t pay for labor to weed – and at the end of the season, they didn’t need to hire extra labor because the harvest was paltry. We paid my school fees in bits throughout the semester and I was sent home more than once when we couldn’t keep up with the payments. But I was lucky. I made it through secondary school, worked for a few years as a basic school teacher, saved up money, and went to university.

Fast forward eight years, I was working at Barclays Bank and an opportunity came up to lead a new lending unit focused on agriculture. I took the job hoping I could help more farmers like my auntie and agricultural SMEs get loans. We were able to accomplish a lot. Our unit grew from just me to six people in three years. We broke down silos between origination and credit risk through a joint team training on underwriting and managing agri-loans. As the portfolio grew, senior management got excited and we also received accolades in the media. USAID even gave us an award for Agri-Lender of the Year in Ghana!

But we also came up against the barriers that have persistently stifled lending to my auntie and so many others. My colleagues on the credit risk team didn’t fully understand seasonality in farming and how timing makes all the difference in agriculture. Many times, we couldn’t get loans approved before planting season and farmers lost interest. We also had conservative policies. We required collateral valued at 120% of the loan amount but then we discounted the value of the collateral presented to us by 30-50% – so a business looking for a $100k loan needed to have collateral of $200k or more!

These internal policies at the bank were so frustrating, but over time I began to understand where they came from. To begin with, banks are naturally risk averse. Lending in agriculture is risky, takes a lot of work, and bankers have to get their nice shoes and suits dirty visiting clients. In Ghana (and most African countries) banks can earn a nice profit by collecting deposits, lending to the government, and getting fat on the interest spread.

Some economists call this the “lazy bank” model. But that’s only part of the story. Around the time my auntie was waiting for her loan that was never approved, international banking standards were changing under the first of the Basel Accords. By the time I was trying to make agri-loans for Barclays, Basel III had taken effect. Basel III was designed to prevent the kind of daredevil lending that led to the collapse of Lehman Brothers and the 2007-08 financial crisis.

The result of Basel III and the International Financial Reporting Standard 9 designed during the same period was more stringent requirements on banks. When I joined Aceli a couple of years ago, I wanted to understand better how these international standards affected Central Bank policies in Africa, and how those policies influenced commercial bank practices. Did banks really need to have such conservative collateral requirements, or were we just being lazy? Read Aceli’s new Learning Brief to find out what I learned.

Auntie Minawo Ate Ahiaku, I promised you that I’ll get to the bottom of this.

Andrew Ahiaku is the Head of Financial Sector for Aceli Africa, leading engagement with commercial banks to increase their lending to agricultural SMEs and supervising capacity building for both SMEs and lenders.







African agriculture has long been neglected by the capital markets – and understandably so:  agriculture is much riskier and costlier to serve than other sectors. While agriculture employs the majority of the population in East Africa and is a leading contributor to GDP, lenders have historically gravitated to easier alternatives, including the stable returns of government bonds without the hard work of navigating dusty roads in remote regions. However, increasing competition is pushing East African lenders into underserved markets. Many have opened branches in rural areas and are now graduating from collecting deposits to lending to customers. Agricultural small and medium enterprises (SMEs) are a large if not well-understood market. 

Aceli is a market incentive facility that aims to unlock financing for high-impact agri-SMEs (see more background on Aceli’s approach). Aceli’s financial incentives aim to bring two things into alignment:

  1. Improve the risk-return profile of agricultural SME lending in East Africa; and
  2. Incentivize lenders to seek out and serve the highest-impact agri-SMEs.

Aceli’s multi-year data collection on loan-level and portfolio-level economics across the region formed the basis for addressing the first objective. Our task around impact was more challenging given the inherent challenges of objectively quantifying impact and the multiple layers of impact we seek to generate: increased incomes for smallholder farmers and enterprise employees, particularly women and youth; higher production of nutritious food at the regional level; and a more sustainable and climate-friendly food system.

Aceli’s recent learning report noted that capital mobilization (i.e., the total loan volume supported by Aceli’s incentives) is a relevant but limited measure of whether our incentives have been successful. At least as important are: 

  • capital additionality (i.e., whether Aceli’s incentives have shifted lender behavior and agri-SMEs are gaining improved access to finance);
  • the impact profile of the SMEs being served (i.e., whether the businesses gaining improved access are aligned with Aceli’s livelihoods and environmental objectives); and 
  • whether capital that is both additional and directed to high-impact agri-SMEs  contributes to increased impact (e.g., by enabling improved market access for farmers, creating more jobs, or allowing the business to manage through market downturns).

This post summarizes Aceli’s approach to incentivizing lending that is (1) additional and (2) targeted to high-impact SMEs. Follow-on posts will go into more depth on Aceli’s incentive design and initial learning related to improved farmer and worker livelihoods and our four thematic impact areas: gender inclusion, food security & nutrition, climate & environment, and  youth inclusion. To learn more, please see Aceli’s Environmental, Social & Governance (ESG) and Impact Policy.

In Q4 2022, our annual learning report will share results from Aceli’s upcoming round of data collection from lenders and two years of implementing the incentives program. We will also delve into how Aceli is working with our data and learning partners – Dalberg Advisors, International Growth Centre, and 60 Decibels – to evaluate (3) the effectiveness of Aceli’s incentives and complementary technical assistance in advancing our impact objectives.

Capital additionality

Aceli defines capital additionality as:

  • Loans to “new” borrowers (defined as a business receiving its first loan of $25k or more from any source in the past three years)
    • To date, 49% of the loans supported by Aceli’s incentives programs go to new borrowers (compared to a target of 35%).
  • Improved access to finance for returning borrowers based on loan amount, financial product, and terms such as collateral requirements and pricing
    • One promising indicator, albeit with a small sample size, is that for the 17 SMEs that are entering the second round of loans supported by Aceli, there has been an average increase in loan size of 37% from Y1 to Y2 (and a corresponding increase in enterprise revenue of 62%). Aceli’s targets for average increase in loan size and revenue are 10%.
    • Several lenders have indicated anecdotally that they are reducing their collateral requirements, lowering their interest rates, and/or more proactively searching for new agri-SME customers that are woman-owned. We will be tracking these changes systematically through structured interviews with lenders during Q2-Q3 and through annual reviews of lenders’ portfolio composition and credit terms.
Approach to impact

Aceli aims to meet market participants – both lenders and SMEs – where they are and shift them towards increased impact over time. We pursue three interrelated strategies to do so:

1. Require “Good” Practices. Aceli has set minimum criteria for every lender, loan, and SME that we support. 

Lender-level: Aceli requires that each of our lending partners has a formal Impact / ESG policy, that staff are trained in the policy, and the policy is integrated into loan-level and portfolio-level management. Several lenders seeking to work with Aceli have not met this requirement when applying to participate in our financial incentives. Rather than rejecting these lenders, our approach has been to allow a six-month grace period and support the lender in designing or improving its ESG policy and integrating the policy into its loan due diligence and monitoring processes. 

Loan-level: To be eligible for Aceli’s incentives, a loan must meet Aceli’s ESG standard, which includes both negative screens (aligned with the IFC exclusion list – see Appendix in Impact Policy) and additional positive social impact criteria (i.e., the SME must either source from at least 25 smallholder farmers or employ at least five full-time workers).

The agribusiness manager for one East African bank reflected on the internal process it has undergone over the past year following Aceli’s support in developing its ESG policy:

“The bank has embedded the ESG policy into our lending process… All AgriSME loans are subject to ESG covenants like gender inclusiveness, environmental protection and social transformation among others. The bank has also scaled up its appetite for green enterprises financing. Exclusions were integrated in our credit analysis due diligence tools and general credit procedure standards. The bank now has an ESG checklist in place and [we have] conducted an online Training of Trainers to all Branch Relationship Officers, Assistant Managers, Branch Managers and the Head Office Credit and Agfin team to skill them up on ESG aspects.
Areas of improvement include continuous awareness raising to staff and SMEs on the importance of ESG compliance for sustainable business and climate proof banking. There is also a need to build an ESG credit score to supplement the usual bank eligibility criteria and underwriting.”


2. Incentivize “Better” Practices. Aceli’s incentives for lenders are tiered: on top of the baseline incentives for loans to businesses that clear the “Good” bar outlined above and increased incentives for loans to new borrowers, we offer impact bonuses to reward lenders for seeking out and serving higher impact agri-SMEs. 

Aceli’s baseline incentives comprised 40% of the total eligible incentive for each loan. An additional 30% is added for loans to new borrowers and 30% on top of that if the loan qualifies for all three of Aceli’s impact bonuses. 

Initially, Aceli offered these bonuses for impact in three different categories: i) gender inclusion, ii) food security & nutrition, and iii) climate & environment. As of March 31, 2022, 68% of the 369 loans supported by Aceli’s incentives qualify for the gender inclusion impact bonus, 57% for food security & nutrition, and 23% for climate & environment. Overall, 150 loans qualified for an impact bonus in one category, 180 in two, and 8 in all three.

As of May 2022, Aceli is adjusting our impact policy and bonus areas based on learning to date and in line with our vision to shift the lending market towards increased impact. 

  • First, we are adding a fourth impact bonus area for youth inclusion to promote lending to SMEs that create economic opportunities for youth as entrepreneurs, business managers, farmers, or employees. The impact rationale is clear: youth account for 45% of the population in East Africa; the majority live in rural areas but have limited employment opportunities. Translating this high-level objective into incentives that can tangibly increase economic opportunities for youth is more challenging. Unlike the gender inclusion criteria, where Aceli was able to adopt the international standard established by the 2X Collaborative, there was no pre-existing standard for youth inclusion – so Aceli has created our own. We will present this approach in more detail in an upcoming post and pilot this policy over the next year.
  • The second notable change in our impact policy is that we have sub-divided the criteria for gender inclusion, food security & nutrition, and climate & environment. In practical terms, this means offering higher incentives or a “double bonus” for loans to SMEs that meet multiple criteria for a given impact area. For example, the standard established by 2X considers an SME gender inclusive if it meets any single criterion across ownership, management, board, employees, or customers (note: Aceli added a category for farmer suppliers since this is a significant impact dimension in the agriculture sector). Aceli’s previous policy – aligned with the 2X definition – treated gender inclusion as binary: either an SME met the standard by fulfilling at least one criterion or it did not. Our revised policy divides the criteria into two sub-categories: 1) leadership (assessed based on ownership, management, and board composition); and 2) inclusion (based on farmer suppliers, employees, and customers). An SME can qualify for a single impact bonus under either gender leadership or gender inclusion OR it can qualify for a double bonus if it meets criteria in both sub-categories. Under the revised impact policy, we are applying a similar approach for food security & nutrition and climate & environment. These adjustments re-weight Aceli’s incentives to place additional emphasis on impact.

Aceli supplements self-reported data from lenders with field visits conducted by our verification partner, Africert, which specializes in ESG audits and certifications for agriculture and forestry in East Africa. Verification visits focus on practices related to Aceli’s climate & environment impact bonus and include assessments at both SME and farmer levels. We will share more detail about this process and learning in the upcoming post focused on climate & environment.

3. Continuous improvement. Practices related to impact at lender and SME levels are not static; nor should we accept the status quo in food systems that remain deeply inequitable and environmentally unsustainable. Aceli is committed to learning and continuous improvement across all of our work. In concrete terms, this includes:

      • Improving the Impact / ESG policy that defines minimum criteria for Aceli’s support and the higher standards to qualify for impact bonuses. We embrace the changes incorporated into our revised policy even as we look ahead to further learning and enhancements in the coming years.
      • Promoting continuous improvement at lender-level. In 2021, the USAID INVEST program supported Aceli and advisory firm Value for Women (VfW) to offer a series of workshops on Gender Lens Investing to Aceli’s lending partners. Fifteen lenders participated in sessions on applying a gender lens to lending processes and strategies for identifying and serving women-led and gender-inclusive SMEs. Two lenders are now working with VfW to develop gender action plans to guide their portfolio management practices. In response to lender demand, Aceli may offer similar advisory to other lenders as well as capacity building related to climate finance.
      • SME-level. In 2021, Aceli collaborated with partners to run a pilot promoting reforestation practices with eight Agri-SMEs and more than 2,000 affiliated smallholder farmers in Rwanda and Uganda. Aceli and Value for Women are exploring an approach to support SMEs in improving their gender practices, particularly related to sourcing and employment. Later in this series, we will share learning from the reforestation pilot and how Aceli is approaching partnerships to promote continuous improvement in Impact / ESG at SME level specifically linked to financing needs (e.g., for off-grid renewable energy).

Forthcoming posts will delve into more detail on Aceli’s incentive design and initial learning related to gender inclusion, farmer and worker livelihoods, food security & nutrition, climate & environment, and youth inclusion.

By Eddah Nang’ole


In my role defining criteria for Aceli’s climate & environment impact bonus and supporting lenders to develop and implement ESG policies, I hold two competing realities in my head. There are the agro-ecological practices that I learned early in my career as a researcher studying how beneficial insects can control pests and in later roles in program management and evaluation for regenerative agriculture. And then there are the practices that I grew up with on our family farm in the North Rift region of Kenya – practices that produced high yields in the past but may no longer, at least in their current form, be viable.

My parents grew maize on a 30-acre plot. We were lucky in many ways because they also had full-time jobs so the farm supplemented our family’s income and paid for education and other basic needs. British settlers had brought mechanized practices to our region decades earlier, and our farm and those around us combined mechanized with manual farming.  We applied synthetic manure and used hybrid seeds. Tilling and planting was mechanized while spraying herbicides, top dressing, weeding, and harvesting was done by casual workers, mostly women and youth.

While my siblings preferred non-farm activities like household chores, I was always interested in the farm and wanted to contribute. From the age of 12 years, I manually kept the farm records in a notebook, tracking our expenses, making sure the workers were paid on time, and helping my parents to balance the books at the end of the harvest. The production cycle followed a steady calendar rhythm: land preparation and planting in March-April, harvesting in October-November. Yields were consistently high – 40-50 bags per acre.

But the yields started to decline in the late 1990s to 30 bags; today, it’s rare for farmers in the region to harvest more than 15 bags per acre. The soils are depleted from intensive monocropping. The weather is changing too: heavy rains around the harvest increase post-harvest losses; fall army worms multiply with the warming temperatures and drive up costs of pest management. Farmers like my brother, who took over the family farm, must choose between doubling down on chemical fertilizers, pesticides, and mechanization or adopting regenerative practices that are more labor-intensive, like planting cover crops, mulching with organic compost, using beneficial insects, and preparing their fields with no-till or low-till techniques.

I’m convinced that regenerative agriculture will benefit farmers, the environment, and our food system in the long run, but the choice for any given farmer today isn’t as clear. Farmers are living on the front lines of climate change. They have limited information, technology, and access to finance. And most don’t have the luxury to experiment with new approaches that might not work.

In developing and administering Aceli’s impact policies, my task is to distinguish between practices that are detrimental to human health and the environment and should be excluded entirely, those that are acceptable or even “good,” and those that are better for both humans and the environment and should be positively rewarded. It has been gratifying to see some positive changes in the year and a half since we launched – four lenders now have ESG policies that didn’t before; many lenders are responding to Aceli’s incentives by proactively looking for businesses that are gender inclusive, youth inclusive, contribute to food security and nutrition, or promote regenerative and circular agricultural practices that qualify for our impact bonuses. Aceli is only one actor in an ecosystem of organizations trying to make African agriculture more prosperous and sustainable. I am happy to be playing a small part.

Eddah Nang’ole is the Impact & Learning Manager for Aceli Africa and responsible for designing and implementing the Impact / ESG policy and impact bonus criteria for Aceli’s financial incentives program.
We sat down with Andrew Ahiaku, Aceli’s Head of Financial Sector, to learn more about his forthcoming working paper on the effects of Central Banking regulations on lending to agricultural SMEs in East Africa. Here are some highlights from our conversation:


Andrew, you’ve spent a lot of time working on this report – why did you take on this project?

I didn’t set out to write this paper. I was looking into literature on how Central Bank regulations affect lending in African agriculture and particularly to agri-SMEs and kept hearing from stakeholders that this analysis was lacking. We know that the majority of the population in East Africa depends on agriculture for their livelihood, but only 5% of bank lending flows to the sector. The natural instinct is to say “the banks are lazy” or the “banks don’t care.” I spent 12 years in banking before joining Aceli and from my own experience I can say that’s often not true. In my opinion, a more accurate characterization is that banks are structurally limited in how much risk they can take by well-founded policies that have unintended consequences of stifling agricultural lending. So most banks take the easier path to earning a decent return- but I know from experience that many would choose differently if given the right incentives and support.

Tell us more about these policies that have unintended consequences?

Following the 2009 financial crisis, the Bank of International Settlements introduced the Basel III Accord aimed at checking overly aggressive bank lending and protecting customer deposits. Two specific policy changes are worth highlighting. The first is Capital Adequacy Ratio (CAR), or the levels of equity a bank must hold on its balance sheet relative to its lending. Basel III imposed more conservative requirements on CAR at a global level; what I find very interesting is that Central Banks in Aceli’s focus countries (Kenya, Rwanda, Tanzania, and Uganda) have adopted controls that are roughly 40% more conservative than the Basel III requirements. While some adjustment seems prudent given the emerging state of East African economies, it’s not clear how the CAR levels in the region compare to actual loan performance. 

The second policy change under Basel III focuses on when and how much capital banks must set aside for credit losses. Pre-IFRS 9, banks would set aside funds to cushion against losses as they occurred. This turned out to be inadequate when losses piled up and many banks became insolvent. The new approach – which I support in principle – is that banks are required to provision for expected losses ex-ante when they book a loan. When combined with the more conservative CAR levels in East Africa, this approach creates a disincentive for banks to lend to riskier sectors like agriculture where they would be required to tie up their precious equity and forego more lucrative opportunities in other sectors.

This sounds like a conundrum: the international banking sector pre-2009 was fast and loose with risk and the public ended up footing the bill of huge bailouts, but you’re saying that the new rules are limiting the flow of credit to agriculture. What should be changed?

To be clear, I don’t think we should go back to the pre-2009 way of doing business. What I and my Aceli colleagues believe is that the mandate of Central Banks to steward the economy in a fiscally prudent way is applied in an overly narrow way in East Africa and may be counter-productive to the broader goal of developing a robust and inclusive national economy. We would like to see an approach where a realistic assessment of expected credit losses from a loan is considered alongside the expected development impact linked to that loan. These two considerations should then be merged to determine whether it is appropriate to incentivize an activity where the expected development impact exceeds the increased risk. Many countries from India to South Africa to the United States have some version of this approach in their policies for requiring or incentivizing the flow of credit to under-served populations. We hope to generate dialogue with Central Banks, policymakers, and other stakeholders in East Africa about how an approach  that incorporates expected development impact can be implemented in each country.

Setting aside all these challenges for a moment, are there also reasons for optimism? 

Yes, absolutely! For example; the Bank of Uganda has introduced an Agricultural Credit Facility that shares in the risk and lowers the cost of funds for on-lending to the sector and in recent years there’s been a substantial increase in bank lending to agriculture in Uganda. 

In July, the Bank of Tanzania announced new measures to stimulate lending to agriculture in response to COVID-19. These include adjustments to the statutory minimum reserve for agricultural lending (which has a similar effect on lender risk appetite as the CAR) and a dedicated pool of low-cost capital totaling TZS 1 trillion (~USD 430 million) to provide liquidity for banks and other financial institutions to on-lend in the sector. 

And Rwanda just announced that it plans to double the share of lending going to agriculture by 2024 – so it’s an exciting time to be working on agricultural finance in East Africa!

SME Impact Fund (SIF) is a non-bank financial institution based in Tanzania that targets agricultural SMEs with significant growth and impact potential. Given the high operating costs of serving agri-SMEs in remote parts of Tanzania, SIF had historically focused on loans ranging from TZS 100M – 1B (~USD 43k-430k). Since joining Aceli’s financial incentives program, SIF has made 12 loans to first-time borrowers, including four loans under TZS 100M (~USD 43k).

This preliminary case study focuses on five loans by SIF totaling $249k. Four of these five loans are to first-time borrowers, and three are under $43k. SIF’s leaders report that it is not likely that it would have made any of the three loans under $43k without Aceli’s incentives, and none of these SMEs had a prior history of borrowing $25k or more from any other lender. While these loans are smaller than the average loan supported by Aceli to date, they provide an unusual opportunity for longitudinal learning from a baseline lack of access to finance.

Follow-on assessments with these SMEs as well as with a larger sample of lenders, SMEs, farmers, and employees across a wider range of countries and crops will evaluate the effectiveness of Aceli’s incentives in:

  • Shifting lender behavior;
  • Mobilizing incremental lending to under-served SMEs; and
  • Generating impact on farmer and employee livelihoods relative to the cost of developing and implementing the program.


Founded in 2013, SIF is a non-bank financial institution based in Tanzania that serves agricultural SMEs. Prior to partnering with Aceli, SIF had made loans ranging from TZS 100M-1B (~USD 43k-430k) with a focus on value-added processing in crops such as maize and rice. From September 2020, when SIF joined Aceli’s financial incentives program, thru June 2021, SIF made 21 loans with support of Aceli’s incentives. Twelve of these loans went to first-time borrowers and four loans were under $43k (i.e., below the level SIF had previously been serving).

This case study focuses on five loans by SIF totaling $249k. Four of the five loans are to first-time borrowers operating in the rice sector and three of the loans are under $43k. One of the five SMEs is 100% owned by a woman entrepreneur and another is 50% woman-owned. SIF’s leaders report that it is not likely that it would have made any of the three loans under $43k without Aceli’s incentives and none of these SMEs had a prior history of borrowing $25k or more from any other lender.[1] As noted above, we plan to track these and a much broader set of SMEs over time to assess if/how financial incentives affect: lender behavior (step 1 in the diagram below), the addressable market of SMEs that lenders serve (step 2),  enterprise growth and resilience (step 3), and livelihoods for farmers (step 4a; e.g., better access to markets) and employees (step 4b; e.g. formal, salaried jobs).

This logic model is a simplified version of how Aceli’s financial incentives link to a set of outputs (in this case, loans made by SIF), outcomes (revenue growth and other benefits reported by the SMEs, farmers, and employees), and impact (to be evaluated at the level of SMEs farmers, and employees over time using both statistical and qualitative methods).  Note: this simplified logic flow does not attempt to capture all of Aceli’s interventions (e.g., technical assistance for SMEs) or expected benefits (e.g., increased economic opportunities for women, more climate-smart and resilient agricultural practices by farmers); these will be assessed through complementary studies.

Simplified logic flow of Aceli’s financial incentives


Aceli offers financial incentives to lenders (step 1) and lenders make loans to SMEs with limited access to finance (step 2)

SIF’s objective (prior to signing up for Aceli’s financial incentives program) has been to identify high-potential agri-SMEs that are not being served by commercial banks and offer more flexible terms and a streamlined process. Prior to joining Aceli’s financial incentives program, SIF was reaching many SMEs that struggled to access financing from commercial banks. However, the high costs of serving agri-SMEs located in remote parts of Tanzania – a country almost as large as France and Germany combined – has meant that servicing loans below TZS 100M was not viable.

Allert Mentink, the CEO of SIF, recently noted how Aceli’s incentives have expanded the pool of SMEs that SIF is able to serve:

By covering a portion of our operating costs and sharing in the risk, Aceli’s financial incentives have helped us serve many new borrowers, including four loans under TZS 100M. These are the first formal loans for each of these businesses and we expect they’ll be able to increase their sourcing, employment, and supply of nutritious foods to the local market with access to finance.

*susceptible to bias since they were conducted by the lender. Interviews with farmers and employees of the SMEs were conducted by a third-party firm, 60 Decibels, that has extensive experience surveying this demographic in Tanzania. The sample sizes for these surveys (43 employees and 87 farmers in total across the five SMEs) are small so findings should be viewed as preliminary and providing insight into more extensive evaluations in the future.

The five entrepreneurs interviewed for this case have previously sought but struggled to access finance with detrimental effects on their businesses. One entrepreneur shared how the uncertainty in accessing finance in the past has undermined the SME’s ability to establish a reliable source of supply from farmers: “In some cases, you can promise farmers and aggregators that you will purchase from them, in expectation that you will receive a loan, and in the end, the loan might come very late or never at all.  Hence, your plan and reputation at times is ruined.”

The minimal financing that the SMEs had been able to access was for very small amounts, interest rates and collateral requirements were prohibitively high, and application processes were long and non-transparent.

Four of the SMEs meet Aceli’s definition of a first-time borrower (i.e., the SME has not accessed a loan of $25k or more in the past three years). The sum of the largest loans received by the five SMEs prior to their loans from SIF was $135k compared to combined loan amounts of $249k from SIF. We used the difference between these amounts to calculate the capital additionality of SIF’s loans: $114k in absolute terms and an 84% increase relative to prior borrowing. Aceli is not aware of a standard for assigning value to capital additionality and we have yet to develop one but, in the context of agri-SME finance, we view any increase in financing in excess of 50% to be high capital additionality. Because the SMEs did not have alternative sources to access these larger loans and because SIF reports that it would not have made at least three of the loans without the incentives, we conclude that there is significant attribution of Aceli’s incentives in unlocking this additional capital.

SME growth

All the entrepreneurs mentioned the positive outcomes of access to finance on their businesses; recurring themes included expanding their market reach, purchasing stocks on time, and enhancing working capital available for the next season. One entrepreneur stated, “The purchases were easy since we paid in cash and smallholder farmers were motivated to sell their stock to us.  Without finance, we were purchasing on credit and many smallholder farmers were not happy, and opted to sell to buyers who paid in cash.” One entrepreneur bought a semi-trailer truck to transport stock more efficiently. Another invested in a rice grading machine, a milling machine, and a packaging machine.

These benefits create a positive feedback loop with increasing sales generating higher margins that propel further growth and ambition. In the words of one entrepreneur:

Access to finance is crucial in affecting my plans for growth because the loan will help me widen and speed up my business operations. It also enables me to stock more during the harvesting period and process and sell more during peaks of scarcity, thereby improving our margins.

In the past, limited access to finance meant that the entrepreneurs were unable to plan for growth. Financing has shifted that mentality, as one entrepreneur reports: “We are planning to expand our business operations in many aspects including increasing our processing capacity, human resources, engaging more smallholder farmers and constructing a modern warehouse (storage) facility. All those plans depend on external finance.”

At the same time, access to finance is not a panacea in the context of a challenging market environment. As one entrepreneur notes: “We expect the funding from SIF Tanzania to have positive impact in our business operations, as all the sourcing, processing and distribution requires finances. However, this year has been challenging due to drop of prices, hence, we are stuck with a lot of stocks, as we hope for the prices to be favorable.” This perspective underscores the need to consider access to finance in the broader context of under-developed agricultural markets and, specifically in 2020-21, the extreme and unpredictable disruptions from COVID-19.

Improved livelihoods for smallholder farmers and workers

From the perspective of development impact, SME growth – often measured by revenues – is a positive indicator and often associated with increases in purchases from farmers and employing more workers. To ensure that our financial incentives are targeted to maximize development impact, Aceli is intent on learning more about what happens in practice: which types of loans to which types of SMEs create what kind and how much impact for farmers, employees, and along agricultural value chains?

We now have baseline metrics for the five SMEs in this case study: In the year prior to accessing financing from SIF, they collectively employed 38 full-time workers, paid $59.8k in salaries, and purchased $749k from a combined 788 smallholder farmers.  We will return to these businesses on an annual basis to track how these metrics are changing over time. We expect to see growth but know it will not be even across the businesses or linear year-to-year.

To go beyond these employment and sourcing metrics, Aceli engaged a third-party firm, 60 Decibels, to conduct surveys with farmers supplying the five SMEs as well as employees. 60 Decibels interviewed 87 farmers and 43 employees across the SMEs and found:

Farmers. Of the smallholder suppliers interviewed (87), 74% report that they are accessing services like those provided by SIF-supported SMEs for the first time. Farmers also spoke about improvements along a variety of farm and household outcomes because of their engagement with SMEs, reinforcing our confidence in the choice of these SMEs as well as providing a baseline to measure progress against once the loan is disbursed:[2]

  • 95% report an increase in household income
  • 90% report an increase in monthly savings
  • Suppliers note they feel less stressed about providing for their families with 69% reporting that they are able to afford household goods and bills
  • Farmers also shared some complaints: 13% identified limited financing on the part of SMEs as a constraint (“They do not have enough money to give credits anymore. They charge higher prices for services”) and smaller numbers (under 5%) complained about long lines to sell their crop at harvest, in part because the SME pays fair prices so is an attractive buyer.
  • From a demographic perspective, it is notable that only 8% of the farmers interviewed are women. We believe that this percentage may not be reflective of women’s participation in these supply chains for two reasons: i) from a cultural perspective, women are less likely to participate in a telephone survey, especially if conducted by a man; and ii) women are often the primary farm laborers even when their male family members own the land or are registered with a buyer as the lead farmer. Note: across the 120 SMEs receiving loans by Aceli as of June 30, 2021, lenders report that 36% of the 158k farmer suppliers are women.
  • The suppliers rated the SMEs in aggregate a Net Promoter Score[3] of 81, which is an indication of high satisfaction among the workers.

Employees. Employees of the five SMEs largely report favorable working conditions and improvements in their livelihoods while some also noted areas where the SMEs can improve:

  • 56% of the 43 workers interviewed[4] report that their job with the SMEs is their first formal employment
  • 65% state their quality of life “very much improved” since being hired by the SME
  • 95% report an increase in income relative to their previous source of income
  • 23% offered suggestions for improvement with the most common critique focusing on poor equipment and inadequate safety measures (7% of total respondents concentrated in one SME) and one noting periodic delays in salary payments (“We are treated well and our salaries are fair… there are times when we do not get paid on time…”)
  • From a demographic perspective, only 16% of the employees interviewed are women (Note: across the 120 loans supported by Aceli as of June 30, 2021, 32% of the 2,339 employees are women).
  • Overall, the employees rated the SMEs in aggregate a Net Promoter Score of 89, which is an indication of high satisfaction among the workers.

Agri-SMEs with additional working capital also have the capacity to expand employment opportunities with many of these jobs go to women and youth. Entrepreneurs noted they plan to hire more seasonal and/or full-time employees. One SME plans to hire 40 seasonal female workers and 2 permanent staff for the upcoming harvest season and another has already hired an additional 11 seasonal and 9 full-time employees.

We reiterate that the sample sizes of lenders (1), SMEs (5), farmers (87), and employees (43) featured in this study are small relative to Aceli’s activities to date (14 lenders, 120 SMEs, 189k farmers, 2.2k workers) and our planned reach by year-end 2025 (30 lenders, 1,000 SMEs, 1.1M farmers, and 25k employees). Nor are the SMEs selected intended to be representative of all the SMEs receiving loans supported by Aceli incentives. Rather, these baseline assessments and follow-on reviews with these SMEs going forward are designed to generate insights about the challenges faced by SMEs with limited access to finance, how expanded access to finance affects their ability to navigate volatile markets, and how their growth trajectory in turn affects farmer and employee livelihoods.

The appendix includes further discussion on issues such as attribution, capital additionality, and cost-benefit analysis that will be incorporated into Aceli’s evaluations over time. It also provides further context on how the SMEs profiled in this case compare to others supported by Aceli’s incentives. Over the next few years, Aceli expects to build a trove of similar case studies with longitudinal tracking to allow for more robust and generalizable conclusions.


As Aceli and our evaluation partners build the evidence base around the logic flow outlined in Diagram 1 (as well as the complementary activities such as technical assistance for SMEs and related impact objectives focused on gender inclusion, climate-smart & resilient agriculture, food security & nutrition, and opportunities for youth), we will consider the following issues, among others:

  1. Attribution: would the lender have made a similar loan on similar terms to the SME without Aceli’s incentives? The SMEs examined in this case are particularly interesting because there is strong indication that SIF would not have made at least three of the five loans that fell into the $25-50k range. Over time, Aceli’s goal is for all lenders to expand their reach to borrowers they would not have otherwise served, in addition to increasing the financing amounts they offer and flexibilizing the terms of their loans. We expect many loans to be similar to the other two loans above $50k (i.e., in the size range that lenders were serving prior to Aceli) and will draw upon both qualitative measures (i.e., asking the lenders if the Aceli incentives affected their lending decision) and quantitative metrics (e.g., comparing loans made across the portfolio pre- and post-Aceli incentives) to estimate attribution.
  2. Capital additionality: was the financing provided by the lender with support from Aceli’s incentives incremental to alternative sources of financing available to the SME? As noted above, four out of five loans went to SMEs that previously had not accessed financing of $25k or more and the combined financing from SIF to the five SME was 84% greater than their previous largest financing. Across the 120 loans supported by Aceli as of June 30, 2021, 60 loans (50%) were to new borrowers and combined financing of $16.9M was 76% greater than largest prior financing. We view both of these metrics as high, especially in the context of COVID-19 where we expect lenders to be risk averse, but do not have enough information to assign attribution to this full pool of loans supported by Aceli’s incentives to date.
  3. Impact: to the extent that the capital was additional, did it measurably increase enterprise growth, improve livelihoods for farmers and workers, and/or generate other social and environmental benefits such as gender inclusion, food security & nutrition, climate-smart and resilient agriculture, and opportunities for youth? The farmer and employee surveys conducted by 60 Decibels for the five SMEs in TZ are the first such surveys linked to Aceli-supported loans so we cannot draw any comparisons of how these results compare to other loans. Going forward, we plan to continue surveying farmers and employees linked to a sampling of SMEs supported by Aceli loans so we can identify representative trends.
  4. Cost-benefit: how does the value of any incremental impact associated with capital additionality that is attributable to Aceli compare to the cost of providing the financial incentives?[5] A meaningful cost-benefit analysis will require more comprehensive and quantitative assessment of the impact on livelihoods (i.e., the benefit portion of the ratio). This will only be possible with much more data gathered over the next few years. In the meantime, we can report on the capital leverage (i.e., total loan amounts supported by Aceli incentives divided by the cost of the financial incentives). The total cost of the financial incentives for the five loans was $42k, meaning that the capital leverage was 6x (relative to total capital mobilized of $249k). This leverage ratio is comparable to the capital leverage ratios identified by Convergence Finance in a recent industry study[6], but significantly lower than the overall capital leverage of 11x for the 120 loans supported by Aceli to date (note: the average size of these 120 loans is $132k). As the SMEs featured in this case grow and require larger loans, we expect that the leverage ratio will increase to similar levels within a few years. Overall, across our four focus countries in East Africa, Aceli expects leverage ratios of ~15x for average loan sizes of ~$250k. Aceli’s goal over the next five years is to build an evidence base demonstrating that the outcomes and impacts generated by loans supported with financial incentives far outweigh the costs of the incentives so that African governments will incorporate similar incentives, funded from their own budgets, into market-enabling policies.


Map of SMEs in Tanzania receiving loans or technical assistance supported by Aceli as of June 30, 2021



[1] Note on methodology: Aceli interviewed the CEO and Portfolio Manager of SIF to get their perspective on how Aceli’s incentives affected their lending activity. The SIF Portfolio Manager conducted interviews with six SMEs that received their first-loan of $25k+ from SIF with support from Aceli’s incentives. These interviews utilized a standard questionnaire but are susceptible to bias since they were conducted by the lender. Interviews with farmers and employees of the SMEs were conducted by a third-party firm, 60 Decibels, that has extensive experience surveying this demographic in Tanzania. The sample sizes for these surveys (43 employees and 87 farmers in total across the five SMEs) are small so findings should be viewed as preliminary and providing insight into more extensive evaluations in the future.

[2] 60 Decibels: Supplier Insights 2021

[3] Net Promoter Score is a gauge of worker satisfaction and loyalty. Scores range from -100 to 100 where 0 means overall indifference. Any score above 50 is considered very good.

[4] 60 Decibels: Worker Insights 2021

[5] Note: cost-benefit is different from “capital leverage,” which can be a useful metric for comparing capital mobilized to the underlying subsidy offered in a blended finance structure but does not capture either attribution or impact.

[6] Data Brief: Blend Finance & Agriculture authored by Convergence, May 2021. Note: most of the blended finance models in this Convergence report are mobilizing public money from development finance institutions as opposed to private capital (which is the case with SIF and most of the lenders participating in Aceli’s financial incentives program

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