By Wairimu Munyinyi-Wahome and Wangui Muna
Across Africa, farmer cooperatives move crops, milk, livestock, and other commodities every day. They anchor rural economies, connect producers to markets, and keep households afloat. Still, many cannot secure even a basic working capital loan. That single barrier quietly undermines food security across the continent. The history of rural economy transformations by cooperatives has been rich, with evidence of access to education, health and increased household incomes shared across rural homes. In recent years, these stories have shifted towards negative narratives, a reflection of institutional stagnation and failure to adapt to a changing ecosystem that demands different and more efficient delivery of services for members.
Kenya shows what happens when the barrier is removed. With practical governance support from Heifer International, several dairy cooperatives that had stalled for years began to change course. Katheri Dairy Cooperative increased daily milk collection from 5,000 to 18,000 litres. Ainabkoi rose from 2,000 to 16,000 litres. Kabiyet jumped from 400 litres to nearly 30,000 litres. The change came from small but meaningful steps: digital recordkeeping instead of handwritten books, clearer management systems, and decisions based on data. Farmers saw results and delivered more milk. Lenders followed.
Africa’s farmers are already leveraging modern farming practices. Many already use drought-tolerant seeds, solar irrigation, fodder preservation, mulching, and improved cropping practices. But without affordable finance or credible institutions behind them, these efforts hit a ceiling. Investments in cooling plants, feed mills, or aggregation centres remain out of reach. Climate shocks undo gains. Cooperatives are rejected by lenders before they have a chance to demonstrate performance.
The obstacle is not ambition. It is institutional readiness and capital that fit rural realities.
Three issues hold cooperatives back. Governance is the first. Many rely on informal systems, incomplete records, and leadership structures that leave lenders in the dark. Without clear data, cooperatives appear risky. Accountability is a big one. The typical co-operative member is no longer semi-illiterate. Most members are now well informed and will not hesitate to seek alternative services that serve them better.
The second is a financial system that was never designed for them. Banks ask for land titles or fixed assets that many farmers do not have. Even cooperatives handling millions in commodity flows remain invisible because they do not match lending models built for urban borrowers.
The third is cost. Interest rates are high. Insurance is expensive or poorly designed for smallholders. Cooperatives are trapped: they need finance to improve, but they need improvement to access finance.
Proven solutions exist
Cooperatives perform best when concessional working capital comes with governance support. Once governance improves, volumes stabilise, member trust increases, and lenders gain confidence. Farmer livelihoods improve because institutions around them finally function.
Digitisation is another critical element. It is not technology for its own sake; it is transparency, credibility, and reduced leakages. In Kenya, digital milk records helped rebuild trust and created data that lenders could rely on. Other new tech-enabled platforms show how credit scoring based on delivery history can unlock financing for rural organisations with no traditional collateral.
Financing must also sit alongside management capacity. When money arrives without internal controls, financial skills, or leadership support, failure follows quickly. Inclusion is part of this capacity. Women and youth cannot be symbolic members. They must hold meaningful positions if cooperatives are to adapt and stay relevant.
Strong cooperatives do more than move volumes. They spark entrepreneurship around them. Transport services, processors, feed suppliers, packaging units, and collection centres emerge because there is reliable demand and predictable cash flow. These SMEs thrive because cooperatives create stable volumes and trusted relationships. Their presence does not replace cooperatives; it grows in the space that strong cooperatives make possible.
Kenya’s dairy experience points to a wider truth. Africa’s agricultural future will not be built on individual farms alone. It will also be built on cooperatives that are well-run, well-financed, and integrated into value chains. They deliver climate solutions at scale, improve traceability, negotiate better prices, and protect farmers who would otherwise stand alone. The social insurance within co-operatives is an asset that needs to be treated as a form of capital. Social capital without clarity on the value-add is a missed opportunity that needs to be explored from an empowerment lens. Core to this includes the role of women and the youth in cooperatives and the due recognition that, for sustainability, these two groups are the engines of success for modern cooperatives based on the advantage in terms of numbers, resilience and adaptability, including the uptake of technology. The frequent mistake is treating cooperatives as beneficiaries of development rather than economic actors. Financing them is not charity. It is an investment in food stability, rural employment, and resilience.
As the continent plans for 2026 and beyond, performance indicators must reflect the realities of cooperative institutions: member retention, volume consistency, governance quality, digital systems, and the ability to withstand shocks. Capital should reward transparency, discipline, and delivery, not collateral that rural farmers cannot produce. The capacity to manage funds should receive the same attention as physical assets.
Africa’s future is not a contest between cooperatives and SMEs. It is a partnership. Cooperatives anchor production and create market power. SMEs bring agility, innovation, and new income streams. Together, they form the system that can feed a growing continent.
A continent built on smallholder agriculture cannot afford to leave its cooperatives unfunded. If food security is the goal, financing these institutions cannot remain an afterthought.
Wairimu Munyinyi-Wahome is the Country Director of Heifer International Kenya, where she leads efforts to drive smallholder farmer transformation and resilience. Wangui Muna, Director of Innovative Finance–Africa, spearheads Heifer International’s innovative financing strategies across the continent.
