By William Matovu, Country Director of Heifer International Uganda, and Wangui Muna, Director of Access to Innovative Finance for Africa at Heifer International.
Climate finance has become increasingly effective at funding climate interventions. It has been far less effective at creating businesses capable of attracting commercial investment. Public and concessional finance alone will never meet Africa’s investment needs. As governments prepare for another round of global climate negotiations, the challenge is no longer simply financing projects but creating businesses capable of attracting commercial capital long after those projects have ended.
At COP29, countries agreed on a new global climate finance goal of at least US$300 billion annually for developing countries by 2035, alongside efforts to scale public and private climate finance to at least US$1.3 trillion a year. The emphasis is moving from the volume of finance available to how public and concessional finance can attract much larger flows of commercial investment. The African Union’s Comprehensive Africa Agriculture Development Programme (CAADP) Kampala Declaration reflects the same ambition through stronger investment in resilient agrifood systems, greater private-sector participation and financing models capable of transforming agriculture into a competitive economic sector. Climate finance has traditionally been organised around adaptation and mitigation. Africa’s agricultural transformation suggests a third objective deserves equal attention: productivity. Investments that improve productivity often deliver adaptation and mitigation outcomes while creating businesses capable of attracting commercial investment long after concessional finance has ended.
In this context, productivity means investments that enable farmers and agribusinesses to produce more efficiently, reduce operating costs, strengthen market access and generate reliable revenues that attract commercial investment.
Agriculture continues to rely heavily on public and concessional climate finance, while private investment remains limited because many agricultural enterprises cannot yet demonstrate the scale, cash flow and risk profile commercial lenders require. Increasing the volume of climate finance will not resolve that constraint on its own. Climate finance must also strengthen the businesses, institutions, and markets that make agriculture investable.
Climate investments are still frequently designed around individual technologies or stand-alone interventions such as solar systems, irrigation schemes and farmer training. These investments generate environmental benefits, but they do not necessarily improve the commercial viability of agricultural enterprises. Banks do not lend because solar panels exist. They lend because businesses generate predictable revenues, manage risk and demonstrate the capacity to repay. The difference between a successful climate intervention and an investable business lies in the economics surrounding the technology rather than the technology itself.
Heifer International Uganda’s renewable energy work began with household biogas systems before evolving into solar-powered milk chilling, productive energy and financing models that combine renewable energy, market access, technical assistance and commercial lending. More than 5,600 biogas systems were installed alongside investments in local biogas construction companies, technical standards and skills development for masons, stove fabricators and bio-slurry extension workers, among others. The focus then expanded towards strengthening dairy cooperatives as commercially viable enterprises rather than simply introducing new technologies.
Many producer organisations spend close to 40 percent of their operating costs on diesel, maintenance and repairs. In Uganda’s dairy financing model, solar electricity costs about US$0.80 per kilowatt-hour compared with US$1.70 for diesel. Lower energy costs improve the economics of dairy cooperatives before they improve environmental performance.
The Distributed Renewable Energy Ecosystem Model (DREEM) Hub brings together farmer cooperatives, technology providers, financial institutions and business development services into a single investment ecosystem. By 2027, it aims to reach 20,000 farmers while creating employment and entrepreneurship opportunities for 1,000 women and young people. The Green Dairy Investment Programme applies the same model at greater scale, targeting 37,000 smallholder farmers, 20 solar-powered milk collection centres and 100 producer organisations, while contributing to a ten-year Dairy Sustainability Roadmap led by Uganda’s Ministry of Agriculture, Animal Industry and Fisheries.
A 30 percent catalytic capital contribution combined with 70 percent concessional debt allows lenders to assess future business performance rather than relying solely on conventional collateral. At Migina Milk Collection Centre, solar-powered cooling eliminated milk losses while enabling more than 197,000 litres of milk, worth about US$49,700, to be chilled each month. Generator-related losses of about US$2,600 per month have been eliminated, carbon emissions have fallen by nearly six tonnes each month and the number of milk suppliers has increased by 22.6 percent. These are climate outcomes, but they are equally business outcomes because they strengthen the revenues and cash flows on which lending decisions are made.
The next phase puts a number on what scaling this model costs. Twenty-four solar-powered facilities are planned across 15 districts in central and south-western Uganda, through an investment of US$2.37 million. Commercial finance has already committed US$1.28 million, leaving about US$1.09 million to be mobilised through catalytic finance and commercial capital. That funding gap illustrates where climate finance creates its greatest value by reducing early investment risk until commercial capital becomes willing to finance a larger share of agricultural growth.
Climate finance will increasingly be judged not by the amount of funding committed or the number of projects delivered, but by whether it leaves behind businesses, agricultural value chains and financial systems capable of sustaining investment after concessional finance has ended. That requires measuring success through improvements in business performance and investment readiness rather than simply counting projects completed or technologies deployed. Africa has no shortage of climate solutions or entrepreneurial farmers. What it lacks are financing models that connect those solutions to productive businesses and functioning markets. Closing that gap, financing productivity, not just projects, is how climate finance builds rural economies capable of financing their own growth.
