Banks Allocate Below 5% Of Loans To Agriculture Despite Huge Capital Pools – IFC

A widening financing gap in Africa’s agricultural sector has come under renewed scrutiny, with commercial banks allocating less than five per cent of their loan portfolios to agriculture despite being well-capitalised and recording strong returns, the International Finance Corporation (IFC) has said.

The division director for Nigeria and Central Africa at IFC, Olivier Buyoya, disclosed this at a pre-AFIS media engagement in Lagos ahead of the sixth Africa Financial Industry Summit (AFIS).

Buyoya said the paradox of a profitable and well-capitalised financial sector and a starved real economy is stark in key sectors.

“Commercial banks are well capitalised, they are making good returns, but if you look at what they lend to agriculture, for instance, it is less than five per cent of their loan book,” he said.

He said IFC and the World Bank Group, under its new five-year Country Partnership Framework for Nigeria, are moving to address the gap by co-creating platforms with financial institutions to de-risk lending to agriculture and infrastructure.

According to him, the framework focuses on helping financial institutions be better placed to finance the real economy, particularly agriculture and infrastructure, through risk-sharing facilities and innovative financing structures.

AFIS Director, Hicham El Alamorabet, corroborated the concern, saying the disconnect between financial sector profitability and real economy financing is central to this year’s summit agenda.

He said AFIS, created in 2021 by IFC and Jeune Afrique Media Group, was set up precisely to bridge that gap.

El Alamorabet noted that the sixth edition of the summit, themed ‘Making Capital Count – Unlocking Growth through African Finance’, will be held in Luanda, Angola, and will focus on how to make African capital work for Africa’s development.

The summit is expected to host over 65 partners, 47 sessions and 1,500 participants, but organisers said success would be measured not by attendance numbers but by policy announcements, deals signed and follow-through.