Perspective: Bridging the climate finance gap: Empowering local entrepreneurs to transform food systems

Across West Africa, small and medium-sized enterprises (SMEs) – many of them led by young people and women – are reshaping the future of food. These businesses are rooted in local communities, driving solutions that build climate resilience, create jobs, and strengthen food security.

Across West Africa, agriculture accounts for roughly 29% of GDP, employs over 60% of the workforce, and provides a livelihood for more than 80 % of the population

SMEs play a crucial role, particularly in food production and distribution. But for all their potential, one stubborn barrier remains: access to finance.

Local SMEs are not lacking in ideas or ambition: they are lacking in tailored support that meets them where they are. Investment readiness is not one-size-fits-all. It requires long-term engagement, capacity building, and technical assistance that reflects the realities of businesses navigating climate risks.

The processes to unlock the finance needed to scale businesses can be complex, the requirements high, and the risk perceptions too rigid. As a result, many promising early-stage enterprises never make it to the table with investors.

Only an estimated 2% of global climate finance reaches smallholder farmers and agri-SMEs despite their critical role in food system resilience and climate adaptation.

Alongside partners, we have learned that when technical assistance is paired with patient, blended finance solutions, we can help promising local businesses enhance their climate resilience and improve their ability to attract appropriate financing. Tailored support is often needed to strengthen producer-facing systems, integrate climate-resilient approaches, and improve governance and ESG practices – essential steps for advancing food system transformation.

One of the biggest structural barriers for local SMEs is the mismatch between the size of financing they need and the minimum ticket sizes investors are willing to consider. Many early-stage businesses, especially those led by youth or women, require financing well below the typical investment thresholds of large funds or commercial banks.

To bridge this gap, innovative solutions are needed. The Dutch Fund for Climate and Development (DFCD), for instance, is working towards this, especially in frontier markets like West Africa.

Collaborating and partnering with local financial institutions (FIs), such as Sterling Bank in Nigeria, which can act as aggregators – pools smaller businesses under a central platform or umbrella to create economies of scale and more attractive investment opportunities. By partnering with banks and cooperatives that already serve local businesses, the Fund has helped channel climate finance more efficiently to smaller enterprises while building the capacity of these FIs to offer climate-aligned financial products.

This approach not only reduces transaction costs but also embeds climate finance within local financial systems, making it more accessible, scalable, and sustainable over time.

Ultimately, designing fit-for-purpose financing structures, whether through local FIs, cooperatives, or specialized credit lines, will be key to closing the financing gap for small-ticket, high-impact enterprises.

The opportunity is clear: youth- and women-led enterprises are key drivers of food system transformation. Yet they remain systematically underrepresented in financing flows.

With over 60% of West Africa’s population under the age of 25, unlocking youth-led innovation is not only an inclusion imperative; it’s an economic necessity.

Importantly, DFCD’s gender equality and social inclusion (GESI) approach deliberately focuses on empowering youth and other vulnerable communities, aiming to ensure that they are positively impacted by climate finance opportunities.  In parallel, DFCD prioritises investments that contribute to biodiversity conservation and enhance food and nutrition security, recognising their critical role in building climate-resilient food systems.

Public-private partnerships are another avenue that offer one of the most promising avenues to close this gap. By combining development capital, government backing, and private sector expertise, these partnerships have the potential help de-risk early-stage investments and shift capital toward businesses that are often overlooked.

In West Africa, we’re beginning to see how patient capital, when combined with embedded technical support, can help farmer cooperatives, women-led enterprises, and youth-driven startups grow from small-scale initiatives into scalable, climate-resilient businesses. However, these businesses are still frequently perceived as too small or too risky by many investors.

With programmes like Innovations Against Poverty, Climate Resilient Agribusiness for Tomorrow (CRAFT), 2SCALE, and IYBA-SEED offering tailored support at each stage of a company’s journey, from early-stage innovation to investment readiness, it has been possible to support local businesses in growing and successfully accessing climate finance.

Still, more can – and must – be done to systematically open the pipeline and design investment pathways that are more accessible to these local actors.

Beyond backing individual businesses, access to finance means strengthening the entire financial ecosystem. This entails improving the policy environment, streamlining investment procedures, and creating spaces where investors, entrepreneurs, and public actors can meaningfully collaborate to accelerate climate action.

At the same time, it’s about supporting the ecological ecosystem – protecting and restoring biodiversity, improving soil and water health, and building climate-resilient agri-food systems that secure food and nutrition for future generations.

The upcoming AFSF 2025 event in Dakar will bring together these diverse voices – from SMEs and investors to policy makers and development partners – to explore scalable financial solutions and showcase real-life cases from across Africa.

Together with Rabo Foundation, the Dutch Embassy in Senegal, Investisseurs & Partenaires, Agriterra, APIX Senegal, and other partners, we will also convene a special event at the Forum to explore some of these questions on unlocking climate finance for local SMEs and make investment pathways more inclusive – particularly for youth and other underrepresented groups.

Critically, the event will spotlight local entrepreneurs – especially youth and women – who are leading efforts to build agri-food systems that not only deliver economic returns but also conserve biodiversity and promote social inclusion.

If we want climate finance to reach those who need it most, we must continue to ask: Who is still being left out? And how can we design systems that truly include them – both financially and ecologically?