Absa Bank Kenya, the UN Capital Development Fund (UNCDF) and the UN Development Programme (UNDP) said on Wednesday they had launched a portfolio guarantee arrangement to expand financing for solar-powered cold storage, aiming to narrow Kenya’s estimated $2.1 billion cold storage financing gap.

The arrangement will allow Absa Bank Kenya to extend asset-based financing to businesses investing in cold chain infrastructure, the partners said, as the country seeks to curb post-harvest losses across horticulture, dairy, fisheries and meat value chains.

Under the deal, UNCDF will provide a portfolio-sharing guarantee that reduces the bank’s lending risk, according to the announcement. The guarantee is designed to widen access to capital in a sector that has historically struggled to secure financing because of high upfront equipment costs and perceived market risks.

Absa Bank will offer loans ranging from $500,000 to $2 million, or roughly 64 million to 258 million Kenyan shillings, the partners said. The financing will target aggregators, equipment suppliers, exporters and other large players in Kenya’s agricultural value chains.

Those businesses are expected to deploy solar-powered cold storage units to smallholder farmers and agribusinesses, helping reduce spoilage and improve access to markets, according to the statement.

Kenya loses up to half of its food production to post-harvest waste because of inadequate storage, the partners said, underscoring the scale of the challenge the guarantee scheme is intended to address.

Solar-powered cold storage has been identified by UNCDF and UNDP as a climate-friendly alternative to diesel-powered refrigeration, particularly for farmers in areas with limited or unreliable access to the electricity grid.

The announcement marks the start of Phase II of a cold chain services programme in Kenya being implemented jointly by UNCDF and UNDP, with support from the Mitigation Action Facility (MAF), a climate finance initiative.

Phase I of the programme demonstrated strong market demand for solar-powered cold storage, the organisations said. Pilot results from that phase showed the potential to benefit more than 60,000 farmers and create approximately 1,200 jobs, according to UNCDF and UNDP.

Within the partnership, UNCDF is providing risk-sharing and blended finance instruments intended to unlock private-sector investment in the sector. UNDP, meanwhile, is supporting policy engagement, technical assistance and coordination among stakeholders to accelerate the rollout of climate-smart cold chain solutions, the statement said.

Kenya’s agricultural sector remains a key pillar of the economy, employing a large share of the workforce and contributing significantly to export earnings, particularly through horticulture.

Post-harvest losses have long been cited by industry groups and development agencies as a barrier to raising farmer incomes and improving food security in the country.

Cold storage financing has drawn increasing interest from development finance institutions in East Africa in recent years, as governments and lenders look to blended finance mechanisms to de-risk investment in climate infrastructure for agriculture.