A few days at an agriculture fair can reveal more than what is displayed in the exhibition stands. The more useful information is often found in the conversations: what farmers are trying to do, what businesses are struggling to access finance, what markets they are trying to reach and, perhaps most importantly, where the financing system does not quite fit the way agricultural businesses operate.
That was one of the more interesting reflections from the 22nd National Agriculture Fair, held at the Chichiri Trade Fair Grounds in Blantyre from 27 to 29 August 2026 and hosted by the Malawi Confederation of Chambers of Commerce and Industry, under the theme, “Transforming Agriculture through Innovation, Value Addition and Market Linkages.” The theme captured an important shift in how Malawi needs to think about agriculture. The challenge is no longer simply increasing production but building an agricultural economy in which production is connected to processing, markets, investment and commercial returns.
For those working in development finance, that raises a more fundamental question: what exactly should agricultural finance be financing?
The problem is bigger than the individual borrower
The conversation about agricultural finance often begins with the individual farmer. A farmer needs money for inputs, a commercial farmer needs working capital, a processor needs machinery and an exporter needs finance to fulfil an order. All of these are legitimate financing needs, but agriculture does not operate as a collection of independent businesses. It operates through relationships.
A farmer may depend on an aggregator for inputs and market access. The aggregator may depend on a processor or exporter that has committed to buying a particular volume and quality of produce, while the processor needs reliable raw materials, equipment and working capital. The exporter, in turn, depends on the ability of the entire chain to deliver products that meet market requirements. When one part of that chain is weak or under-financed, the consequences can extend well beyond the individual business seeking finance.
This is particularly important in Malawi, where financing for agricultural investment remains scarce and uneven, including for large-scale investors. A Malawi 2063 policy brief on financing opportunities for a highly productive and commercialized agriculture sector, published by the National Planning Commission in 2022, put commercial bank lending to agriculture at less than 12 percent of total lending. It identifies the risk profile of the sector, variable rainfall, climate shocks, volatile agricultural prices, limited market access and the absence of adequate insurance as some of the factors affecting agricultural lending. It also notes that lending has tended to favour agricultural trading rather than production.
The policy brief makes an important observation about the structure of agriculture itself. Agriculture is a sequence of interlinked activities and transactions, beginning with the supply of inputs and ultimately ending with consumers, yet there have been limited financial instruments specifically designed to strengthen the links between actors along that chain.
That observation changes the financing question. The challenge is not only whether there is enough money available for agriculture. It is whether financial products are designed around the relationships and transactions that allow agricultural businesses to create value.
If agriculture is a value chain, why do we finance it one borrower at a time?
This is where the concept of value-chain finance becomes important. Instead of looking only at the individual borrower, value-chain finance considers the commercial relationships surrounding production. Who is producing? Who is supplying the inputs? Who is organising the producers? Who is buying the output? What volumes are required? What standards must be met? How will the produce reach the market? And where will the revenue come from to repay the financing?
These questions provide a different starting point for assessing agricultural finance. A business that can demonstrate a functioning commercial relationship with producers and buyers presents a different proposition from one simply seeking money to increase production without a clear route to market. The financing is considered alongside the commercial activity it is intended to support.
This distinction matters because production does not automatically create commercial value. Malawi can produce more agricultural commodities and still struggle to generate sufficient income from them if those commodities cannot be stored, processed, transported, sold or exported competitively.
That is why the emphasis on market linkages at this year’s agriculture fair was significant. The push towards agricultural commercialisation is increasingly about connecting production with processing, value addition, buyers and markets rather than treating production as the end point.
The real financing question, therefore, may sometimes be less about “Who needs money?” and more about “What needs to be financed for the value chain to work?”
A financing model built around the value chain
The idea of financing an agricultural value chain can sound straightforward, but its significance becomes clearer when translated into how financing actually works.
The Export Development Fund (EDF), a development finance institution wholly owned by the Reserve Bank of Malawi, has a financial product called the Contract Farming and Export Agriculture Facility, known as ConFarm, which provides one practical example. The facility is tailored for agribusinesses and exporters working with smallholder farmers under formal contract farming arrangements, while also providing financing to farmers engaged in large-scale commercial farming. It can cover up to 70 percent of total production costs, including input supplies, land preparation, harvesting, post-harvest handling and advisory support.
What makes the model interesting is that it does not treat agricultural finance as a single financing requirement. The facility addresses several points in the production system. It provides working capital for contract farmers to purchase agricultural inputs, supports production infrastructure such as irrigation and warehousing, and finances machinery and implements used in production, processing and transportation. It can also provide guarantees to commercial banks and input suppliers involved in extending credit to contract farmers, and offers project preparation and advisory support intended to take projects to a bankable stage.
In effect, the financing is structured around the different requirements that have to come together for agricultural production to become a viable commercial activity.
Consider a contract farming arrangement in which an agribusiness has an established relationship with farmers and a market for the resulting produce. The farmers need inputs and production support. The agribusiness may need working capital, machinery or infrastructure. The input supplier may be willing to extend credit but needs some form of risk mitigation. The buyer needs confidence that the required volumes and quality will be delivered.
Each relationship creates a financing requirement, but those requirements are connected. A value-chain approach recognises this connection rather than treating every financing need as a separate transaction.
ConFarm’s structure reflects this. Alongside direct financing, EDF works with contract buyers, farmer organisations, insurance companies, financial institutions and agro-dealers that engage with farmers in the contract farming value chain.
The result is a model in which finance can be linked to production, infrastructure, inputs, risk management and markets rather than being considered solely as a loan to an individual producer.
The market is part of the financing equation
One of the most important features of this approach is the role of the market. Agricultural finance can become difficult when production is financed without sufficient consideration of what happens to the output. A farmer may have the capacity to produce more, but if there is no reliable buyer, additional production does not necessarily translate into stronger cash flows. Similarly, an exporter may have access to a market but struggle to fulfil an order because production has not been adequately financed.
This is why the relationship between production and the off-taker is important in contract farming.
Under ConFarm, applicants for the loan product are required to have confirmed export orders or contracts for targeted and approved commodities. The model therefore connects production finance to a defined commercial opportunity rather than treating production and the market as completely separate activities.
The logic is straightforward. If finance is being provided to increase production, there needs to be a credible understanding of where that production will go and how it will generate the cash flow required to sustain the business and repay the financing.
This does not mean that having a contract removes all risk. Agricultural production remains exposed to climate conditions, pests, disease, commodity price movements, operational failures and changes in market conditions. A contract can strengthen the commercial structure, but it cannot guarantee performance by every participant.
That is why the financing model also considers other parts of the risk environment. Assets financed under the ConFarm loan product are required to carry comprehensive insurance cover, while the facility’s partnership structure brings financial institutions, insurers, input suppliers, agro-dealers, farmer organisations and buyers into the wider financing arrangement.
The underlying principle is important: agricultural finance works differently when the financing decision takes account of the commercial system surrounding production.
The farmer does not always have to be the borrower
This also changes how we think about financing smallholder farmers. When the objective is to increase access to agricultural finance, it is tempting to assume that every farmer must become a direct borrower from a financial institution. But that may not always be the most effective structure.
A smallholder farmer can participate in a commercially organised value chain without borrowing directly from a development finance institution. An anchor farmer or agribusiness can organise production and connect smaller producers to inputs, technical support and markets. Cooperatives can aggregate farmers and production. Input suppliers can participate in financing arrangements, while commercial banks can finance parts of the chain according to their mandates and risk appetite.
EDF’s approach to contract farming recognises this possibility by allowing smallholder farmers to participate through cooperatives or an anchor-farmer model, where a lead commercial farmer engages smaller producers.
This creates a useful distinction between financing farmers and financing agricultural production systems that include farmers.
The second approach does not make the individual farmer less important. It recognises that the farmer’s commercial prospects are often influenced by the strength of the relationships around them. If the farmer has access to inputs, a defined market, technical support and an organised buyer, the financing proposition looks different from that of a farmer producing without those connections.
But value-chain finance is not a shortcut
There is a risk of presenting value-chain finance as though it solves all the problems associated with agricultural lending. It does not.
A value chain can be well structured and still fail. A buyer may not perform. A harvest may be lower than expected. Prices may fall. Climate events can disrupt production. Transport and storage costs can undermine margins. A business can also have a good market opportunity but lack the management capacity to execute it.
This is why the structure of the financing matters as much as the availability of capital. ConFarm’s requirements illustrate this point. Applicants must be registered entities, demonstrate access to land for production or aggregation and provide a feasibility study demonstrating the viability of the contract farming model and its export potential. The loan product also requires an owner’s contribution of at least 20 percent of project cost for working capital and 30 percent for capital expenditure and guarantee facilities, acceptable security, sound farm management structures, a land holding of not less than 100 hectares with title deeds, confirmed export orders or contracts for targeted and approved commodities, a farming track record of at least three years and comprehensive insurance cover on the assets financed.
These requirements establish that value-chain finance is not simply about making money available. The commercial relationships, production capacity, market opportunity and risk management arrangements have to be sufficiently developed to support the financing. They also make clear who the borrower is. A facility of this kind lends to a commercial-scale entity that meets those thresholds, and smallholder farmers participate through that entity rather than as applicants in their own right.
What happens to businesses that are not yet large enough?
Not every agricultural business will have the scale, track record, collateral or commercial structure required for a facility such as ConFarm. Some businesses are still building their production base. Others may have a viable idea but lack the documentation, market arrangements or financial capacity needed to access larger-scale financing.
This is where the broader financing ecosystem becomes important. A smaller producer may need financing through a cooperative or an anchor business. A growing agribusiness may require commercial bank financing supported by a guarantee. A business with a promising project but insufficient preparation may need technical assistance or project preparation before it can approach a lender. EDF’s own Project Preparation Facility is aimed at that stage, although it applies its own conditions, including a minimum land holding of 200 hectares and a promoter contribution towards the cost of the preparatory work.
The objective, therefore, should not be to make one institution responsible for financing every participant in the agricultural economy. It should be to create financing pathways that correspond to the different stages, risks and relationships within the value chain.
From financing transactions to financing value creation
This way of thinking challenges the assumption that the individual borrower is always the most useful unit of analysis.
In agriculture, the commercial outcome often depends on several participants working together. The value created by financing a farmer can depend on whether there is an input supplier, an aggregator, a processor, a buyer, adequate infrastructure and a functioning market around that farmer.
The same is true further along the chain. Financing a processor may increase demand for agricultural produce, but only if producers can supply the required volumes and quality. Financing an exporter may create an opportunity for foreign exchange earnings, but only if the production system can reliably fulfil the order.
This is why financing value chains requires looking at both the flow of finance and the flow of goods. Money needs to reach the point where it enables production. Produce then needs to move through aggregation, processing, storage, transport and marketing until it reaches the buyer. The stronger the commercial connections between these stages, the clearer the relationship between the financing provided and the revenue expected to repay it.
For development finance, this creates an opportunity to support investments that may have effects beyond a single borrower. A financing intervention can strengthen production capacity, facilitate market access, reduce financing constraints within a value chain or help bring other financiers into the transaction through guarantees and risk-sharing.
The objective is not to replace commercial finance. It is to help make more commercially viable activity possible within the market.
The product terms described here are indicative and summarised from published information; any financing remains subject to appraisal and to the conditions agreed in each case.
