A $4.8mn soybean compact in Dar es Salaam offers a blueprint for unlocking billions in smallholder credit
Dar es Salaam
When Yohane Kaduma signed his name on a grant agreement with Norway’s embassy in Tanzania on October 23, 2025, he was finalising more than just another development project. The managing director of PASS Trust was activating what development finance experts say could become a replicable model for addressing one of Africa’s most intractable problems: how to make smallholder farmers bankable.
The ceremony in Dar es Salaam’s business district was modest, with soybean milk and snacks served alongside speeches, but the ambition behind the $4.8mn “commodity compact” is not. Over three years, the partnership aims to quadruple soybean yields for more than 21,000 farmers in southern Tanzania, while demonstrating that blended finance structures can unlock commercial credit at scale for crops that have historically struggled to attract investment.
“For 25 years, we’ve been telling banks that smallholder farmers aren’t as risky as they think,” says Kaduma, whose organisation has facilitated more than TZS2tn ($790mn) in agricultural loans since 2000. “This is the first time we’re taking that model and applying it to an entire value chain—from seed to market—with development capital as the catalyst.”
If successful, the initiative offers a potential template for agricultural transformation across sub-Saharan Africa, where an estimated 33mn smallholder farmers produce roughly 80 per cent of the food supply but remain chronically underserved by formal financial systems.
The mechanics of catalytic capital
At the heart of the Tanzania model is a financial structure that development economists call “de-risking”—using patient capital to absorb enough risk that commercial lenders will step in.
Norway’s $2.4mn grant enables PASS Trust to establish a guarantee facility. For every dollar guaranteed, participating banks typically lend three to four times that amount. The total mobilised investment of $4.8mn thus leverages significantly more commercial credit—potentially $15mn-20mn over the project period—creating what advocates describe as a “multiplier effect” for development finance.
“The grant isn’t subsidy in the traditional sense,” explains Kjetil Schie, minister counsellor and deputy head of mission at Norway’s embassy in Dar es Salaam, who signed the agreement on behalf of Oslo. “It’s catalytic capital. We’re taking first-loss position to crowd in commercial finance that otherwise wouldn’t flow to these farmers.”
The mechanism addresses what economists call the “missing middle” in agricultural finance—farmers who are too large for microfinance but too risky for commercial banks. In Tanzania, where agriculture accounts for roughly 25 per cent of GDP but only 7 per cent of formal lending, the gap is particularly acute.
Geoffrey Kirenga, chief executive of AGCOT (Agricultural Growth Corridors of Tanzania), argues the soybean sector exemplifies the problem. Tanzania imports roughly 300,000 tonnes of soy annually—primarily for animal feed—despite having suitable land and climate for production. Current domestic output ranges from just 7,000 to 20,000 tonnes.
“The constraint isn’t agronomic potential,” Kirenga says. “It’s access to credit for inputs, equipment, and storage. Banks won’t lend because they don’t understand the crop and perceive it as risky. Farmers won’t invest without credit. It’s a classic coordination failure.”
The commodity compact attempts to break this deadlock by co-ordinating multiple actors—development partners, financial institutions, agricultural organisations, processors, and buyers—under a single financing framework.
Why soybeans matter
The focus on soybeans reflects both economic and nutritional imperatives. As a protein-rich legume that fixes nitrogen, soy offers climate benefits while addressing two of Tanzania’s strategic priorities: food security and import substitution.
“Soybeans contain more protein than meat or eggs,” Kirenga notes, citing the crop’s potential for combating child malnutrition. “But more immediately, every modern livestock operation—whether poultry, fish farming, or cattle fattening—depends on soy-based feed. If Tanzania wants to develop a competitive livestock sector, domestic soy production is essential.”
The economics are compelling. At current import levels and international prices, Tanzania spends roughly $150mn million annually on soy imports. Ministry of Agriculture assessments suggest smallholder farmers could produce up to 2mn tonnes annually if constraints were addressed—potentially transforming Tanzania from net importer to regional exporter.
The government has designated soy as a “strategic crop” alongside wheat and avocado, signalling policy support. The challenge is translating that commitment into practical mechanisms that reach farmers.
This is where the commodity compact model diverges from conventional approaches. Rather than simply providing credit, it orchestrates a complete ecosystem: quality seed distribution, agronomic training, mechanisation support (through PASS’s leasing subsidiary), post-harvest handling, storage linked to warehouse receipt systems, and guaranteed market offtake through processor agreements.
“We’re not financing production in isolation,” Kaduma explains. “We’re financing a coordinated system where each component de-risks the others.”
The corridor development strategy
The initiative builds on Tanzania’s “corridor development” approach—a spatial planning strategy that concentrates agricultural investment in high-potential zones with existing or planned infrastructure.
Originally focused on the Southern Agricultural Growth Corridor (SAGCOT), the model has expanded to four corridors covering much of Tanzania’s productive agricultural land. The approach mirrors similar initiatives in Mozambique, Ghana, and Malawi, though implementation has varied widely.
Critics of corridor development have raised concerns about land rights, environmental impacts, and whether benefits actually reach smallholders versus larger commercial farms. The Tanzania soybean compact attempts to address these criticisms by explicitly targeting smallholder farmers—with at least 40 per cent women and youth—and emphasising climate-smart practices.
“Soy production must not come at the expense of Tanzania’s forests,” Schie emphasises, noting Norway’s strong focus on environmental protection. “As a nitrogen-fixing legume, soy should improve soil health and support rotation systems. This is agriculture that works with nature, not against it.”
The project’s initial focus on Ruvuma region—a relatively remote area bordering Mozambique and Malawi—is strategic. Current yields average just 700kg per hectare, less than a quarter of achievable levels with improved practices. The region accounts for roughly 10,000 of the 21,000 farmers already engaged through earlier AGCOT and PASS Trust programmes.
If yields reach the target of 3,000kg per hectare, household incomes could increase by more than 40 per cent—potentially lifting thousands above poverty thresholds while demonstrating viability to both farmers and financiers in other regions.
Nordic development finance evolves
Norway’s involvement reflects a broader evolution in Nordic development finance strategy. Oslo has maintained development partnerships in Tanzania for nearly six decades—one of its longest bilateral relationships in Africa—but the nature of that engagement has shifted.
“Twenty years ago, we would have funded infrastructure or delivered aid directly,” notes a Norwegian development official familiar with the programme. “Now we’re asking: how can limited development capital unlock much larger commercial flows? How do we build sustainable systems rather than dependency?”
This philosophy aligns with broader international trends. As development finance institutions face pressure to demonstrate value for money and sustainability, blended finance mechanisms have gained prominence. The OECD estimates that every dollar of development finance mobilises approximately $4 in private investment when structured effectively, though results vary significantly by sector and geography.
Agriculture presents particular challenges. Unlike infrastructure projects with long-term revenue streams, smallholder farming involves thousands of dispersed actors with variable productivity and limited collateral. This is why innovations like PASS Trust’s guarantee mechanism—which effectively makes banks whole if farmers default—are drawing attention from development finance circles.
“What’s interesting about the Tanzania model is that it’s been stress-tested,” observes a World Bank agricultural finance specialist who requested anonymity to speak candidly. “PASS has been doing this for 25 years. They understand local context, have relationships with banks, and have demonstrated that default rates are lower than banks assume when you structure lending properly.”
Scaling ambitions and scepticism
AGCOT’s Kirenga is bullish about scaling. Current investment in Tanzania’s soybean value chain totals roughly $30mn. The goal is $300mn within five years—a tenfold increase that would require replicating the commodity compact model across crops and geographies.
“We have to think big,” Kirenga says, echoing a phrase he repeated at the signing ceremony. “This partnership is catalytic. Success attracts more capital—both development finance and commercial investment.”
But development economists caution against over-optimism. African agriculture is littered with promising pilot projects that failed to scale due to governance challenges, market volatility, or simply the complexity of coordinating multiple actors over time.
“The theory is sound,” says a researcher at a London-based development think tank. “Blended finance can work. But execution is everything. Can they maintain coordination as they scale? Will commercial banks actually continue lending when the guarantees diminish? Do market linkages hold when production increases significantly?”
There are also questions about whether productivity gains materialise as projected. Agronomic potential is one thing; achieving it consistently with smallholders facing variable rainfall, pest pressures, and labour constraints is another. Soy cultivation requires specific techniques—proper inoculation, precise spacing, timely harvesting—that demand farmer training and behavioural change.
“The $4.8mn isn’t just credit,” notes Slighton Godfrey Kabelege, who leads the grassroots implementation through Movement for Community Development (MCODE). “Significant resources go to extension services, demonstration plots, and farmer field schools. Without that technical support, simply providing credit could increase indebtedness rather than incomes.”
The broader African context
Tanzania’s initiative comes amid growing interest in agricultural value chain finance across sub-Saharan Africa. The African Development Bank has prioritised value chain financing in its Agricultural Transformation Agenda, while the Alliance for a Green Revolution in Africa (AGRA) has promoted similar approaches, though with mixed results.
What distinguishes the Tanzania model is its explicit focus on commodity compacts—multi-stakeholder agreements that align incentives across the value chain. Rather than fragmented interventions, the approach attempts to create a coordinated system where farmers’ success depends on, and contributes to, the success of processors, input suppliers, and financiers.
“Value chain finance only works when all links in the chain have incentives to make it work,” argues Kaduma. “That’s why we brought processors and buyers into the agreement from the start. Their market demand gives banks confidence. Banks’ lending enables production that processors need. It’s mutually reinforcing.”
The warehouse receipt system—which allows farmers to store crops and access credit against stored inventory—adds another layer of sophistication. Tanzania has been developing these systems for several years, with soy recently incorporated. By linking production finance to storage and market offtake, the compact reduces multiple risks simultaneously.
Whether this model proves replicable in other contexts remains unclear. Tanzania benefits from relatively strong institutions, functioning financial markets (by regional standards), and government commitment to agricultural transformation under its “Vision 2050” development strategy, which aims to increase agricultural exports from current levels of $2.3bn to $101bn by mid-century.
Countries with weaker institutions, less banking penetration, or more volatile political environments might struggle to implement similar approaches, regardless of technical design quality.
Climate and nutrition dimensions
Beyond economic considerations, the initiative aligns with growing international emphasis on climate-smart agriculture and nutrition security—two priorities increasingly central to development finance.
As a legume, soy fixes atmospheric nitrogen, reducing fertiliser requirements and greenhouse gas emissions while improving soil health. The crop also requires relatively less water than some alternatives, making it potentially more resilient to climate variability—a critical consideration as southern Africa experiences more frequent droughts.
Nutritionally, increased domestic soy production could address both human and animal nutrition. Tanzania faces persistent child malnutrition, particularly in rural areas. Soy-based products—from fortified porridges to milk alternatives—offer affordable protein sources that could improve dietary diversity.
“Food security isn’t just about calories,” notes a nutrition specialist at a Dar es Salaam-based research institute. “It’s about nutrient density. Soy can help address protein deficiency, but only if processing facilities exist and products reach consumers at affordable prices. That’s why the value chain approach matters—production without processing infrastructure just creates new bottlenecks.”
The livestock dimension may prove more immediately transformative. Tanzania’s poultry sector has grown rapidly but remains heavily dependent on imported soy meal for feed. Domestic production could reduce costs for producers while creating more profitable market opportunities for soy farmers—creating the “win-win” dynamics that make value chain finance sustainable.
The proving ground
As implementation begins, all eyes will be on Ruvuma. PASS Trust and partners must now deliver: registering farmers, distributing quality seed, ensuring banks actually lend, providing agronomic support, and maintaining market linkages as production scales.
“The next three years are a proving ground,” Kaduma acknowledges. “We believe this model works. We’ve seen it work in pieces. Now we need to demonstrate it works as an integrated system, at scale, sustainably.”
For Norway, the bet is relatively small in fiscal terms—$2.4mn represents a minor line item in Oslo’s development budget. But the strategic implications are larger. If the commodity compact achieves its aims, it offers a template for Nordic development finance agencies looking to maximise impact with limited resources.
For Tanzania, the stakes are higher. Success could catalyse the agricultural transformation that has eluded the country despite decades of effort. It could demonstrate that smallholder farmers can be competitive, creditworthy, and central to economic growth—rather than subsistence producers requiring perpetual subsidy.
And for the 21,000 farming families whose livelihoods depend on whether soybean yields actually quadruple, the abstract debates about blended finance and commodity compacts translate into concrete questions: Will this year’s harvest be better than last year’s? Will we earn enough to educate our children? Will we still be farming five years from now, or will we join the migration to cities?
The modest signing ceremony in Dar es Salaam has set in motion an experiment that could help answer those questions—not just for Tanzania, but potentially for millions of smallholder farmers across Africa still waiting for formal financial systems to recognise their potential.
As Kaduma put it in his remarks: “This is about transforming agriculture from subsistence to enterprise. If we can demonstrate that here, with soybeans, in Ruvuma, then we can do it anywhere.”
Additional reporting by [Staff Reporter] in Dar es Salaam
Correction: An earlier version of this article misstated the title of Kjetil Schie. He is Minister Counsellor and Deputy Head of Mission, not Deputy Head of Mission only.
Background: Tanzania at a glance
Population: ~65 million GDP: ~$80 billion (2024 est.) Agriculture’s share of GDP: ~25% Agriculture’s share of employment: ~65% Current soybean imports: ~300,000 tonnes annually Current soybean production: 7,000-20,000 tonnes annually Number of smallholder farmers: ~10 million Formal credit penetration in agriculture: <10%
The Norway-Tanzania partnership
- Development relationship: ~60 years
- Total Norwegian development assistance to Tanzania: Approx. $3 billion since 1960s
- Focus areas: Agriculture, renewable energy, governance, education
- Recent high-level engagement: President Samia Suluhu Hassan’s state visit to Norway (2024)
What is commodity compact financing?
Commodity compact financing is a structured approach to agricultural value chain finance that brings together multiple stakeholders—development partners, governments, financial institutions, input suppliers, processors, and buyers—under coordinated financing arrangements.
Key features:
- Blended capital: Combines concessional/grant funds with commercial finance
- Guarantee mechanisms: Development finance absorbs first losses, reducing risk for commercial lenders
- Value chain coordination: Ensures all links—from input supply to market offtake—are financed and aligned
- Multi-stakeholder agreements: Formal commitments from processors to buy, banks to lend, government to provide policy support
Advantages:
- Multiplies development capital impact
- Creates sustainable, market-based systems
- Reduces multiple risks simultaneously through coordination
Challenges:
- Complex to design and coordinate
- Requires strong institutional capacity
- Difficult to scale beyond pilot phase
- Market volatility can undermine careful planning
Voices from the field
“If Tanzania wants modern livestock farming—producing quality meat, modern poultry, or fish farming—we must have soy. There’s no other reliable protein source.” — Geoffrey Kirenga, CEO, AGCOT
“This partnership represents our vision—to transform agriculture from subsistence to enterprise.” — Yohane Kaduma, Managing Director, PASS Trust
“Soybeans are more than a crop; they are a pathway to prosperity, resilience, and inclusive growth.” — Kjetil Schie, Minister Counsellor, Royal Norwegian Embassy
“We are deeply honored to transform farmers’ lives, specifically in the soybean value chain, to ensure sustainable agriculture and improved livelihoods.” — Slighton Godfrey Kabelege, Movement for Community Development