According to the 2025 Macroeconomic Performance and Outlook Report released by the African Development Bank (AFDB), East Africa is projected to be the fastest-growing region in Africa, with GDP growth expected to rise from 4.4% in 2024 to 5.3% in 2025 and further increase to 6.1% by 2026. However, the underserved investment market in East Africa is immense. In response, new business models are emerging to address the barriers to financial inclusion in the form of mobile banking, digital lending, and other fintech innovations. Achieving success in reaching the underserved with appropriate services tailored to their needs includes focusing on enterprising individuals plus small and growing businesses.
adOpes Microleasing Fund
In 2023, the SDG Impact Finance Initiative, with the support of Convergence, awarded a $200,000 expansion grant to adOpes under the Innovation Window. The Design Funding was specifically used to support expansion of the adOpes Microleasing Fund, which provides 9 to 18-month lease-to-own contracts to facilitate the acquisition of productive use assets by smallholder farmers. The Fund was launched in May 2023 and has deployed capital in Kenya, Tanzania, and Uganda, providing financing to Savings and Credit Cooperatives (SACCOs) and Microfinance institutions (MFIs) for microleasing to smallholder farmers, who would otherwise remain excluded from asset finance. In addition, the fund offers capacity-building and technical assistance, with the support of local technical partners to the investees and farmers.
Impact To-Date
As of December 2024, the adOpes Microleasing Fund's investments in partner SACCOs and MFIs have provided financing for lease-to-own contracts for 16,424 productive assets (microleases) for farmers in the region, with 68% of the total assets leased by women farmers. These microleases are expected to increase the income of smallholder farmers by approximately $4.8 million over the next three years. Additionally, the Fund's investments have had an indirect mobilization or crowding in effect, with SACCO and MFI partners leveraging about 50% of additional capital to help to co-finance these leases. The activity through the Microleasing Fund also led to the creation of 57 formal jobs at the SACCO and MFI levels.
Since May 2023, farmers have acquired a diverse range of assets, including farm tools, small transport, land leases, and climate-smart equipment such as solar and biogas-powered assets. By acquiring climate-smart assets, smallholder farmers are also contributing to SDG 13 (Climate Action) through the reduction of CO2 emissions as well as SDG 7 (Affordable and Clean Energy), by promoting the use of energy-efficient and environmentally friendly technologies. As of December 2024, the Microleasing Fund has financed 444 climate smart assets, resulting in an estimated 775 tCO2 emission reductions.
Through these initiatives, farmers like Vicky Cherono and Margaret Wanja have been able to transform their farms and homes, significantly changing their lives. Microleases are structured to transfer ownership to the farmers upon payment of the assets. This enables women and youth to overcome the collateral barrier of traditional lending.
adOpes’ unique approach
Within just 18 months of operations, adOpes has successfully achieved two key milestones; non-performing loans of only 1% and successful recycling of capital through repaid principal and interest. Several factors contribute to the Microleasing Fund experiencing comparatively low losses. First, the Fund exclusively finances microleases for assets that can be sold in secondary markets in case of defaults. The ability to retain the asset while making payments and benefiting from its use provides a strong incentive for farmers to stay on track with payments. Second, the demand for asset finance tailored to the needs of farmers in East Africa exceeds the available capital. Thousands of SACCOs and MFIs across Kenya, Rwanda, Tanzania, and Uganda are looking to fund assets for their farmers, allowing for a rigorous screening and accreditation process to ensure requisite experience, vintage, balance sheet size, and current portfolio performance. Currently, the Fund’s indicative pipeline stands at 96 SACCOs/MFIs seeking to fund $48 million in assets for farmers. Additionally, having an external investment committee with extensive regional and sectoral knowledge and experience and a rigorous risk management framework ensures good governance. Finally, the microleasing portfolio is diversified by asset classes, countries, and currencies, mitigating geographical concentration risk.
How to enhance and sustain impact in the microleasing and agrifinance sector?
From a market systems development perspective, adOpes’ investment approach extends beyond directly benefiting agriculture and agriculture finance supply chains. It also engages and catalyzes enterprises in supporting functions of the agriculture market system, including asset/equipment suppliers, micro-insurance providers, training providers, and input suppliers. By addressing a key constraint in agrifinance, a single investment can lead to growth in economic activity, job creation, and higher incomes, delivering significantly higher value for money compared to direct investments in each function separately.
SACCOs and MFIs, along with digital solutions and banking agents, have built a strong network in rural areas that link the financial sector with farmers. However, their services are often limited to deposits, savings, and small loans rather than productive loans to facilitate growth in the sector. Many SACCOs and MFIs remain unable to meet the capital needs of the vast numbers of farmers. Therefore, investments to scale high-performing SACCOs and MFIs are a critical component to driving growth and an untapped opportunity for the financial services market from both commercial and impact perspectives.
Additionally, capacity building plays a crucial role in empowering farmers. Financial literacy, entrepreneurship training, and agricultural best practices help both farmers and SACCOs and MFIs unlock their full potential while further de-risking the Fund’s portfolio. Availing capital for productive agricultural assets will also accelerate the distribution and uptake of climate-smart and green technology in the region.
Key positive trends in the microleasing and agrifinance space
Agriculture is more vital than ever before. The global population is expected to reach 10 billion by 2050, leading to higher food consumption. Currently, family farms produce 80% of the world’s food supply. Agriculture continues to be a crucial sector for Africa's socio-economic development. Smallholder farming alone supports over 60% of the continent's population and contributes around 23% to Africa's GDP. Access to inputs, financing, and availability of water are essential for agricultural productivity and ensuring food security. These factors present both significant challenges and opportunities for the agricultural sector.
adOpes has observed a significant increase in awareness of agriculture’s importance, particularly the role of farmers in primary crop and livestock production in East Africa. Farmers not only supply food for consumption but also provide inputs for value-added agriSMEs across the region.
Agriculture is increasingly important in providing livelihoods and income generation, especially for women and the growing youth population. Over the past three to five years, the agriculture sector has gained more recognition, leading to increased capital investment in agriSMEs. However, investing in primary agri-value chain production at the smallholder farmer level and their related activities remains a challenge. Farmers face multiple risks, including reliance on rain-fed agriculture, climate change impacts, and fluctuating input and selling prices for their produce.
As investors seek solutions to address these challenges, agrifinance players have a growing opportunity to innovate and provide tailored financial products for rural farmers.
How Design Funding advanced the solution, and what’s next for adOpes?
The Design Funding award helped to further propel adOpes and its Microleasing Fund by increasing visibility and attracting increased investor interest. In addition, the upfront rigorous and competitive application process allowed adOpes to further consider, refine, and align its offerings. The award supporting key design and expansion activities, combined with adOpes’ demonstrated impact so far, has further strengthened confidence in its forward-leaning and inclusive financing model. The grant has also supported deal structuring efforts in Kenya, Tanzania, and Uganda, further advancing the Fund’s mission.
Looking forward, adOpes and the Microleasing Fund aim to fund the demand pipeline and continue to grow a quality portfolio that will take them into profitability. adOpes also plans to expand and deploy capital in Rwanda later in 2025. Together with partners in the areas of technology, insurance, capacity building, asset companies, agriSME,s and Ministries of Agriculture, adOpes aspires to build a platform that supports farmers in East Africa beyond capital alone.
