Financial incentives
Aceli’s financial incentives address the high risks and low returns in agri-lending. The incentives motivate lenders to expand their geographic reach, increase their risk appetite, and target underserved borrowers.
Financial incentives
Lenders receive 2-9% (average: 5%) first-loss coverage at a portfolio level for loans ranging from $10k-$1.75M. Lenders earn money into a reserve account for every loan that qualifies, with loans to higher-impact segments – such as first-time borrowers – earning higher coverage. This mechanism absorbs the incremental risk of reaching underserved SMEs.
Aceli compensates lenders for the lower revenues and higher transaction costs of making smaller loans ($10k-$500k) to early stage SMEs. These businesses are themselves profitable, but the smaller loans they require to grow may not generate enough income to cover lenders’ costs even when the loans repay at market rates. This incentive offers additional income that lenders apply towards activities like hiring and training agri specialists, adapting loan products for seasonal agricultural cycles, and defraying the cost of field visits to remote production zones.
To qualify for the first-loss coverage and origination incentives, a lender must demonstrate that the borrower benefits smallholder farmers and/or low-wage workers. Aceli also provides impact bonuses for loans to businesses that meet higher standards across the following areas: economic opportunities for women & youth, food security & nutrition in Africa, and/or environmental sustainability.
“Your vision helped us develop the appetite for ag. Previously, we would have been thinking twice before doing agri-lending. You guys are giving us courage.”
Commercial Bank
Tanzania
“Aceli allowed us to enter value chains that we have never targeted before.”
Commercial Bank
Kenya
“We are seeking to move from 33% of the portfolio being women to 50%. This is where we feel we can have a major impact and impact bonuses will help. We are also seeing how we can target youth.”
Non-Bank Financial Institution
Kenya
“For [financing a new crop], it was 100% the Aceli incentive that helped us go in. Aceli changed the thinking and mindset towards looking at the cash flow rather than traditional collateral.”
Commercial Bank
Uganda
Impact of incentives
Aceli’s financial incentives increase lender risk appetite and behavior. More flexible collateral leads to larger loan sizes, unlocking enterprise growth. On average, SMEs receiving Aceli-supported loans are increasing annual revenues by more than 20%.
Average Aceli-supported SME profile
Agri-SMEs play a critical role in strengthening rural economies. They facilitate market access for smallholder farmers and create employment, particularly for women and youth, in production, post-harvest, and processing activities.
$87k
Average loan size
435
Farmers accessing markets per SME
16
Workers employed per SME
All Aceli supported loans
Since 2020, Aceli’s lending partners have issued:
$320M
in agri-SME loans
1.6M
smallholder farmers served
58k
full-time workers employed
Data & learning
Dive deeper into Aceli’s research to learn how we’re generating new data and insights to support our partners in closing the agri-SME financing gap.
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Aceli Africa Year 3 Learning Report
Shares data & learning drawn from 1,567 agriculture loans totaling $152M. We present metrics from our financial incentives program, data trends in agri-SME lending across East Africa, and ingredients for sustained lender behavior change.
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Bridging the Financing Gap: Unlocking the Impact Potential of Agricultural SMEs in Africa
Shares findings from our review of data from 31 lenders on 9k+ transactions totaling $3.7 billion and presents Aceli’s marketplace approach to unlock increased financing for agri-SMEs.
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Women’s Economic Opportunity in African Agriculture: 2024
Builds upon initial findings published in 2022 highlighting Aceli’s approach to partnering with a marketplace of 40 financial institutions to promote economic opportunities for women by increasing lending for agri-SMEs in East Africa.
