Facilitating Access to Climate Finance for Small-Scale Agricultural Producers in Kenya

Most agriculture in the world is rain-fed, meaning that farmers depend on rainfall for their crops. This makes them highly vulnerable to variable rainfall and drought and to related pests and disease pressures.      

Small-scale agriculture producers in low-resource settings are especially at risk with limited support to cope or adapt. In Kenya, the volatility of recent years illustrates the challenge clearly — severe flooding displaced over 100,000 households in 2024, and later that same year, poor rainfall left more than 800,000 people food insecure. As weather patterns become more erratic, these impacts are expected to intensify.

Investing in climate adaptation can de-risk the agricultural sector by supporting farmers, economies, and the finance sector. To help farmers adapt, governments, international donors, and the private sector are channelling billions of dollars into climate finance initiatives. Much more is needed, but the challenge is not just about how much finance is mobilized; it is equally about how well it reaches the people and places that need it most.

To better understand these questions, we conducted an in-depth assessment of the climate finance landscape for agriculture in Kenya on behalf of the Gates Foundation. The research explored how smallholder farmers currently access financing for climate adaptation, how financial institutions and programs interface with them, and what opportunities exist to scale adaptation finance in the coming years.

Understanding the Landscape of Climate Finance in Kenya

RTI and our Kenyan partner, Act for Change Consulting, used a mixed-methods approach that combined a literature review with 25 in-depth interviews across Kenya’s agri-finance ecosystem. Participants included commercial banks, microfinance institutions (MFIs), savings and credit cooperatives (SACCOs), and county governments implementing local climate funds.

The findings painted a complex picture. While Kenya has one of the most advanced financial sectors in Sub-Saharan Africa, with widespread use of mobile money and innovative lending models, most smallholder farmers still struggle to access affordable financing for adaptation.

Interconnected Barriers Limiting Access to Finance for Adaptation

Our interviews revealed a set of interrelated barriers across farmers and lenders that limit access to finance:

• Low creditworthiness: Many smallholders lack collateral, land titles, or formal income records.
• Low financial literacy, coupled with mistrust: Farmers often misunderstand loan terms or perceive them as unaffordable.
• Limited insurance adoption: Even as lenders protect their portfolios, farmers themselves remain uninsured against climate shocks.
• High interest rates and fear of default: Annualized rates can exceed what small producers can repay, reinforcing risk aversion.
• Short loan tenor and grace periods: Loan repayment schedules rarely align with the long payback periods of adaptation investments.
• Slow processing and misaligned risk tolerance: Blended finance programs can take months to disburse, and lenders remain wary of smallholder lending risk.
• Capital constraints: savings and credit cooperatives and local funds often run short of liquidity despite strong demand for loans.

The net effect of these barriers is that the adaptation finance needs of smallholders do not align well with financial product offerings, preventing access for financing of resilient inputs, assets, land improvements, and services that could de-risk farming ventures.

Without adaptation, farmers remain exposed to weather risks. As one Kenyan farmer and microfinance officer explained: 

Agriculture in Kenya… is significantly affected by unfavourable weather… higher risk investments will attract higher interests… weather-dependent ventures are likely to be seen as too risky with chances of default being higher. Without ways of de-risking such ventures, access to financing will remain low.

Bright Spots: Local Institutions Driving Adaptation Financing

Despite these challenges, the study identified promising bright spots—especially among Kenya’s savings and credit cooperatives and county climate change funds (CCCFs).

SACCOs: Community-based lenders with flexibility and trust

Savings and credit cooperatives are often the first point of financial contact for smallholder farmers. They provide smaller loan sizes, lower processing fees, and more flexible repayment schedules than most commercial lenders. Some savings and credit cooperatives have achieved loan uptake rates as high as 80% among their members, far above the national average of 16–48% of farmers accessing credit.

One savings and credit cooperative manager noted, “Our success comes from low pricing, efficient processing, and financial literacy training for our members.” Yet many report that capital shortages limit their ability to expand lending.

County Climate Change Funds: Local prioritization in action

Across Kenya, county climate change funds have pioneered participatory planning for climate adaptation, engaging communities to identify and fund resilience investments such as water infrastructure or soil conservation projects. These funds have proven effective in aligning local needs with climate priorities, but like saving and credit cooperatives, they remain under-capitalized and depend heavily on donor or national budget allocations.

The Promise and Pitfalls of Blended Climate Finance

Kenya is also home to several large-scale blended adaptation finance programs that combine public, philanthropic, and private resources to de-risk and scale investments. Six active or emerging programs represent more than $1 billion in projected funding commitments.

These programs channel concessional capital through financial intermediaries such as banks, microfinance institutions, and saving and credit cooperatives, which then on-lend to smallholder farmers. For example, the National Agricultural Value Chain Development Project (NAVCDP) uses matching grants that strengthen saving and credit cooperatives and led some farmer associations to formalize as saving and credit cooperatives. Similarly, the De-Risking, Inclusion, and Value Enhancement of Pastoral Economies (DRIVE) project connects pastoralist groups to markets and financial services, reducing drought risks.

While these programs have delivered important benefits such as new irrigation schemes and expanded market access, they also face challenges such as complicated access requirements, delayed disbursements and limited visibility into farmer-level outcomes. These challenges must be addressed to unlock the potential of blended finance to achieve its potential global development impacts.

Opportunities for donors and philanthropy to finance climate-resilient agricultural

Donors and philanthropy can play a catalytic role in overcoming these barriers and bridging the financing gaps by strengthening existing local mechanisms and by piloting new approaches.

Based on our research, including interviews across the Kenyan agri-food system, opportunities could include: 

• Design new financial products, enabling farmers and small and medium-sized enterprises to invest in adaptation solutions. Effective products will be aligned to cash flow realities of farmers and small and medium-sized enterprises, which vary by value chain, and they may include bundling of insurance and technical assistance. For example:
  • Working capital loans that allow smallholders to purchase irrigation-as-a-service alongside horticulture inputs, with repayment structured around seasonal income cycles.
  • Asset financing for small and medium-sized enterprises to purchase climate-smart post-harvest processing equipment, bundled with a climate-indexed insurance product to protect against weather-related risks to repayment.
• De-risk adaptation business models through partnerships among ag-tech providers, off-takers, and financial institutions. For example, data-driven credit scoring or new partnerships to scale access to solar irrigation and mills can expand uptake of adaptive solutions.
• Bolster local capital pools by investing directly in liquidity or in capacity development for saving and credit cooperatives or county climate change funds. Even modest infusions can unlock significant lending capacity at the local level, and capacity can enable digitization and increase fundraising ability.
• Support digital innovations that reduce loan processing times, automate risk assessment, and improve traceability of adaptation impacts. Done well, these tools can build lender confidence while simplifying access for farmers.
• Build financial literacy and inclusion, ensuring that women and marginalized groups who are disproportionately affected by climate impacts can access and effectively use adaptation finance.

Together, these interventions could help Kenya’s smallholder finance ecosystem shift from fragmented and risk-averse to responsive and resilient.

The Future of Climate Financing for Kenya’s Agriculture     

As Kenya continues to confront the realities of shifting weather patterns, smallholder farmers remain at the heart of its adaptation story. The insights from our study underscore that opportunities currently exist to help farmers better access adaptation finance,  but solutions aren’t yet reaching them effectively or at the scale needed.

Philanthropic and donor funders have a unique opportunity to close this gap by building on Kenya’s local institutions and blending financial innovation with community-driven solutions. When smallholders can access the right finance at the right time, they can withstand climate shocks and build a more resilient, food-secure future.

About the study:

This research was led by RTI International in collaboration with Act for Change Consulting, supported by the Gates Foundation. Lead authors: Tyler Ovington, Caleb Milliken, and Haley Harrison, with support from Tom Bishop and Amanda Rose.