Cooling the Crisis: How Smart Financing is Transforming Kenya’s Agriculture

Loss to Value (L2V) Project is tackling one of Kenya’s most persistent agricultural challenges, post-harvest food loss, by combining innovative cooling technology with creative financing solutions. Funded by Danida Green Business Partnerships (DGBP) and implemented by DCA Kenya alongside partners Danfoss and Financial Sector Deepening (FSD) Kenya, the project is demonstrating how blended finance can unlock access to cold chain infrastructure for small-scale farmers and traders who would otherwise be left behind. In this article, Project Coordinator, John Riungu introduces the L2V project, explains why post-harvest loss is such a pressing issue in Kenya, and unpacks why access to finance remains one of the biggest barriers to solving it. 

1.  Explain Loss to Value (L2V) Project in a nutshell? 

Loss to Value (L2V) Project is focused on reducing food loss and waste for farmers and traders through the introduction of innovative cooling solutions proximate to production areas. It addresses the challenge of massive post-harvest losses recorded by farmers from farm to collection centres, as well as the broader production and market challenges that impact the income farmers receive. Post-harvest loss is a particularly critical issue in Kenya because it represents value lost after farmers have already invested resources such as inputs, labor, and land, yet fail to get compensated for that effort. The project primarily targets small-scale vegetable farmers and traders operating in local fresh produce markets. 

2.  Why is financing a major barrier in addressing post-harvest losses? 

Access to finance limits farmers ability to invest, scale and increase productivity. If farmers do not get financing affordably and at the right time, investment in the right tools and practices is low which comprises on the quality and quantity produced. Eventually, these production does not reach the destination market exacerbating the post-harvest losses 

3.  What challenges do smallholder farmers and SMEs face in accessing finance? 

Smallholder farmers & SMEs lack the necessary collateral and are considered as a risky undertaking to most lenders. Additionally, most farmers may not have any financial track records needed for credit scoring. 

4.  Why are traditional financing models not sufficient? 

Traditional financing is designed for formal businesses with stable income. They focus on the lender ability to pay which can be demonstrated through liquid assets, cash flows records and transactions. This locks out majority of the potential farmers and SMEs. 

5.  What needs to be done to unlock innovative and affordable financing for smallholder farmers and SMEs? 

Finance needs to be considered as an enabler on businesses and enterprises. As such, financial intermediaries need to re-think the approaches and strategies of making financing affordable by applying different approaches like value chain financing, blended financing or digital financial solutions that will make it more affordable and accessible to farmers and SMEs. 

6.  What is blended finance, in simple terms? 

Blended finance means bringing different types of funds to finance interventions that most of the financiers or banks would consider too risky to engage in. Blended finance brings onboard public or donor money to reduce the risks and attract private sector actors. 

7.  Why did the L2V project choose a blended financing model? 

The project has collected food loss data that demonstrate there is a business case in investing in cooling at the first mile (farmer level). The cold chain is expensive, and most farmers would not afford investment in it. To demonstrate a business case and reduce the envisaged risks, L2V project has adopted a blended financing approach to enable farmers to access the facilities but in an affordable way. 

Blended finance is supporting farmers, who would otherwise be left out, to access cooling services and benefit from reduced postharvest losses. 

It takes the imminent risks and thus attracts investors and financial institutions to invest and do business with smallholder farmers and SMEs. 

8.  Who are the key players in the blended financing structure? 

9.  How does the blended financing model work in practice under L2V? 

L2V is combining a number of approaches in its blended financing modelling. The project received a grant to purchase and install the first two units with an agreed that once the units are operational, farmers will be paying to a holding account that can be used to set additional units or be used as guarantee fund. The project is also in a process to set up a guarantee fund facility with a local financial institution to enable them lend money to farmer cooperatives. 

10. How does this model support agribusinesses and farmer groups? 

The blended finance model enables agribusinesses and farmer groups to access cold storage services even without having to invest in the initial colossal capital expenditure. 

11. What role does technical assistance play alongside financing? 

Technical Assistance supports the farmer organizations and SMEs in putting up right system, applying the knowledge and adopting best practices that will enable them attain the desired financial goals. 

12. What early results or impact have you seen from this financing model? 

The early results demonstrated include reduced post-harvest losses, increased production and improved market access leading to increased farmer incomes. 

13. How does blended finance contribute to long-term sustainability? 

Blended finance unlocks opportunities where farmers and SMEs can invest, scale up and enhance productivity reducing donor dependency and creating market-driven systems. It provides a platform do develop a bankable business case for cooling that can attract investors and other financial institutions. Blended finance reduces the perceived risks attractive many private sector actors/investors. 

14. How does the model contribute to climate resilience and green growth? 

Blended finance helps unlock investment in climate-friendly solutions by reducing risks and attracting private capital, enabling economies to grow while protecting the environment and strengthening resilience to climate change. This approach stimulates greater investment in climate-smart technologies that reduce food loss and waste, improve efficiency across agricultural value chains, and support the development of sustainable enterprises. In turn, it promotes green job creation, strengthens local economies, and accelerates the transition toward more resilient and environmentally sustainable food systems. 

15. What lessons can policymakers learn from the L2V blended financing model? 

That blended financing unlocks investments, strengthens markets and enhances sustainability. However, in additional to blending finance, conducive ecosystems are required to make the results impactful. Specific lessons would include: 

16. Can this model be replicated in other counties or sectors? 

The model is replicable in other counties and sectors; what is needed is a bit of tweak to fit within the specific context. 

17. What needs to happen for blended finance to scale in Kenya’s agricultural sector? 

In Kenya blended finance is being applied in different agricultural sectors but in different scales and intensity. What is required for full scale is collection of relevant sector specific data, documentation of successful cases and using those cases from large scale replication. 

18. How has access to finance changed their business trajectory? 

Farmer cooperatives have significantly reduced food losses by 40%, while increasing production by 24% and incomes by 32%. With higher and more stable incomes, farmers are now better positioned to meet their financial obligations, making it feasible to repay investments in cooling infrastructure within a structured and predictable timeframe.