Role of Government in Rural and Agri-Finance: Transitioning to private sector involvement

Published 14 August 2020

Women form a majority of the agricultural workforce in East Africa as farmers and employees in agricultural value chains, but there is a vast gender gap in economic opportunities across the sector. Similar gaps persist at the level of senior management, board, and business ownership, where women entrepreneurs struggle to access capital relative to their male counterparts.

Overcoming these disparities will require a range of interventions from policy changes to shifts in cultural norms around gender roles. While no single actor can tackle these alone, it is essential that every actor aiming to build a more prosperous African agriculture sector – or a thriving economy more broadly – integrate gender inclusion into their strategy.

Our new Learning Brief highlights:

  • Aceli’s Approach to Gender Inclusion: Our experience adapting the 2X Criteria to lending for agri-SMEs in East Africa
  • Our Data: Learning from our first 22 months of offering impact-linked financial incentives for lenders
  • The Opportunity Ahead: Actions that Aceli and our partners are taking to close the economic opportunity gap for women, and outstanding questions for further exploration

Read it here

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.

There are many well-documented barriers to agri-SME finance: risk aversion on the part of lenders, lack of collateral on the part of SMEs, and weak infrastructure, among many others.

The Aceli team, led by Head of Financial Sector Andrew Ahiaku, has recently delved into a set of barriers that is not commonly discussed: Central Bank regulations.

These highly technical policies and the ways in which regulated financial institutions interpret them are key drivers of the agricultural credit gap. Our new Learning Brief on this topic draws upon our review of the literature, conversations with more than 70 practitioners in East Africa, and the experiences of our team from the perspective of both lending and borrowing.

Read it here

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.

Amid the ongoing challenges posed by COVID-19 and climate change—compounding the finance gap that pre-dated both—the need for investment in the African agriculture sector is more urgent than ever.

Aceli’s experience in Year 1 indicates that there is growing interest from private sector lenders to expand their agriculture portfolios. See here for a deeper data dive into Aceli-supported loans to date.

With new commitments from the Dutch and UK governments, Aceli has now secured $62M in funding through 2025 to scale up our activities.

Our latest report distills learning from our first year of implementation and highlights three key areas for learning in the years ahead:

  • How can public & philanthropic resources be targeted most effectively to attract private sector investment?
  • How can private investment be steered to optimize social & environmental impact, and what meaningful measures can we use to assess progress toward this goal?
  • How can the learning from Aceli’s model build an evidence base for blended finance that can spur adoption at the country level and replication in other sectors & geographies?

Download the Learning Report

At a sector convening in December 2017, lending practitioners discussed barriers to growing the finance market for agricultural SMEs: namely, the mismatch between the risk-return hurdle of capital providers and the addressable demand among businesses. Stakeholders in attendance pushed lenders to put hard evidence behind their anecdotal experiences.

This report synthesizes our journey over the past two and half years: first to distill the economics of agri-SME lending across a diverse set of lenders and then to design solutions to bridge the gap – estimated at $65 billion a year across Sub-Saharan Africa – between capital supply and demand for agri-SMEs.

In partnership with Dalberg Advisors and with funding from 12 donors, we reviewed data from 31 lenders on 9,104 transactions totaling $3.7 billion and also conducted in-depth interviews with lenders, technical assistance providers, and many other ecosystem actors.

This report shares our findings and presents Aceli Africa’s new data-driven, marketplace approach to align capital supply and demand and unlock increased financing for agri-SMEs.

Download the summary and full report below:

>> Summary Report


>> Full Report



Aceli Africa collaborated with ISF Advisors to build on previous analysis of the natural stages of agricultural finance and interrogate more deeply the transition that countries make from government-led to more bank-led agricultural finance.

This new briefing note adds the historical experiences of Mexico, Turkey, and Uganda (as well as other specific initiatives in other countries around the world) to past research by ISF Advisors into the United States, Germany, and South Korea, to gain a greater understanding into the unique approaches that different countries have taken to make this transition.

While these approaches are heavily influenced by each country’s macro-level approach to managing the economy, analysis shows the importance of meso-level enablers and more direct micro-level interventions. As we unpack government actions into these different levels and acknowledge the dynamic interplay between the agricultural and finance sides of the market we create a more systemic view of these historical experiences.

Read the Role of Government in Rural and Agri-Finance briefing note and case study compendium.