NextBillion - A WDI Publication

Smallholder farmers are the backbone of East African agriculture, accounting for approximately 75% of production in countries such as Kenya, Uganda, Tanzania and Ethiopia. At the same time, formal food retail is expanding across the region, with supermarket chains growing to serve increasingly urban consumers seeking convenient, high-quality and diverse agricultural products. In Kenya alone, formal food retail accounts for $12 billion.

Given the natural alignment between the region’s smallholder-driven supply base and its growing supermarket demand, one might expect smallholder farmers to be among the primary beneficiaries of formal food retail’s growth. Yet despite this growth, the formal retail market remains inaccessible to many smallholders, as a range of barriers prevent them from supplying these vendors. The agricultural production is present; the coordination is lacking.

As part of the FCDO’s Africa Food Trade and Resilience programme, which aims to increase intra-African food trade and improve smallholder income and resilience, AGRA and TechnoServe ran a “Kenyan High-Value Market Pilot” to test what is required in practice to link regional smallholder suppliers to formal retail markets.

We took a market-based approach, partnering first with Kenyan supermarkets and the aggregators that supply them to understand their procurement needs and the barriers that prevent them from sourcing from smallholders. Our pilot was then able to use this knowledge to support smallholders in reaching real sales opportunities, with the aggregators consolidating and coordinating supply from multiple producers to allow the supermarkets to source at scale.

Over four months, the program facilitated the sale of 63 metric tons of smallholder produce, with a projected annual volume of 586 metric tons, based on advanced orders and the trajectory of supply agreements. Through aggregators, smallholder producers are now supplying previously inaccessible supermarkets.

From our experience working closely with aggregators and supermarkets in this pilot program, we identified some key constraints that limit market linkages between smallholder farmers and formal retailers. Below, I’ll explore those constraints, and share some of the approaches we developed to address them.

The five missing links between farmers and formal retail markets

The program identified five key “missing links” that separate farmers from formal retailers: market information, quality, supply and logistics coordination, cross-border trade, and financing.

Market information: In our experience, buyers and suppliers require more than an introduction to begin working together. Concerns over non-payment, non-delivery and quality failings make new relationships risky. Moreover, supply, demand and price variation create challenges for medium- and long-term planning.

To facilitate new partnerships, we screened, vetted and matched buyers and suppliers, taught smallholder-linked suppliers how to present their products and negotiate prices with formal retailers, and facilitated coordination to match buyer demand with smallholder production.

As buyers and suppliers continue to interact and build trust through networking and trial and error, there is opportunity for private innovators, industry associations, development organizations and governments to develop digital or low-tech market linkage solutions (e.g., a market actor directory showing historical transactions and reviews from prior trading partners) to lower coordination barriers and facilitate further partnerships.

Quality: To meet the requirements of high-value retailers, smallholders needed to make immediate improvements to their produce quality, with more sophisticated refinement likely needed over time. In our pilot program, the changes needed to meet current formal retail requirements were relatively minimal, and we were able to facilitate them by training smallholders to improve their post-harvest handling practices and use food-grade crates to minimize produce bruising.

As formal retailers across the region continue to face food safety scrutiny, further quality criteria are likely to become differentiators, if not requirements, for suppliers. The program assessed smallholders against the Kenyan Good Agricultural Practice standard to identify farm-specific actions to improve food safety and traceability. For example, smallholders were trained to document pesticide application timing to ensure a sufficient gap between application and harvest.

As high-value retail produce quality expectations evolve, investment for the necessary training and equipment for smallholders may come from buyers looking to strengthen their supply bases, farm associations improving their members’ commercial viability, development partners, or some combination of the above.

Supply and logistics coordination: The price and availability of logistics services, particularly for cross-border trade, remain a key constraint. For many suppliers, inconsistent produce volumes make it difficult to secure regular, cost-effective transport, while fragmented supply increases inefficiencies across the value chain.

In our pilot program, what proved effective was coordinating suppliers to aggregate volumes and align delivery schedules to buyer demand. This planning allowed suppliers to fill truckloads, reduce per-unit transportation costs, and provide the predictable supply desired by formal retail customers. Aggregating supply also facilitated access to cold-chain logistics, to maintain quality and deliver over longer distances.

Private sector actors can profit from providing these shared logistics and cold-chain services on a fee-for-service basis. Improving access to these services would not only reduce costs and losses but also enable more suppliers to participate in regional trade.

Cross-border trade: We worked with aggregators in Tanzania to supply Kenyan markets — a process complicated by non-tariff barriers to trade. By organizing a stakeholder forum and a workshop at a one-stop border post (where regulatory officials maintain a presence), we allowed traders to sit down with regulators to understand cross-border trade requirements.

From working with these parties, we observed a clear desire for stronger regional government coordination. Suppliers and buyers alike want access to regional market opportunities, and expect their governments to see not only the fiscal benefits of customs revenue, but also the benefits of neighborly cooperation to food system resilience.

In these conversations, traders and regulators highlighted practical opportunities to improve the efficiency and predictability of border crossings, such as the implementation of the East African Community’s harmonized sanitary and phytosanitary regulations, and the consolidation of border interactions under a lead agency. Both parties agreed that regional horticultural shipment procedures should be adjusted to make it easier to consolidate consignments in one container, facilitating smallholder farmers’ access to regional markets.

Financing: Both buyers and suppliers sought financing to meet working capital needs and fund necessary investments. During the pilot, we introduced market actors to financial service providers and provided loan application support, but longer-term solutions are needed at greater scale.

Many smallholder-linked aggregators lack the formalization (e.g., record keeping, governance, succession planning) required to access funding. In response, lenders should partner with technical assistance providers to overcome these access barriers and build a pipeline of bankable businesses. Aggregators’ relationships with established market actors remain an underutilized avenue for unlocking finance; financiers can leverage these relationships to develop or more widely deploy tailored value chain financing products for agriculture (e.g., tripartite arrangements, supply chain financing). Solutions like technical assistance and value chain financing unlock banking services to businesses that would otherwise lack access, while reducing financier risk. The financial institutions that pursue them stand to grow while simultaneously improving portfolio risk.

The road to formal market inclusion for East African smallholders

Formal food retail is expanding in East Africa, with Kenya’s supermarket sector growing from $9.6 billion in 2022 to $12 billion in 2024, and modern outlets gaining traction across Uganda, Rwanda and other countries. At the same time, regional coordination is gaining momentum, with intra-East African Community (EAC) trade growing from $12.1 billion in 2023 to $19.3 billion in 2025, and the EAC reaffirming its commitment to regional integration earlier this year. Even as non-tariff barriers persist and implementation lags policy ambition, corridor upgrades (e.g., road capacity expansions, digitized border procedures) and harmonized regulations are creating a plausible backdrop for predictable cross-border sourcing. The opportunity to link smallholder farmers to the predictable revenue streams of high-value retailers has never been more accessible.

Smallholder suppliers have long been excluded from high-value markets due to constraints in quality, coordination, logistics, border processes and access to finance. Our pilot demonstrates that these are not structural limitations: They are system constraints that can be addressed.

As the program has shown, there is no longer any doubt about whether smallholder suppliers can serve formal markets. The question now is whether we can build the systems that allow them to do so consistently and at scale.

Daniel Njiwa is Director for Inclusive Markets, Trade and Finance at AGRA; Kris Ansin is the Country Director at TechnoServe for Kenya, Tanzania and Uganda; Audrey Tsoi is a Fellow with TechnoServe.

Photo credit: Dragos Condrea