Absa Bank Kenya, the United Nations Capital Development Fund and the United Nations Development Programme have agreed to a financing arrangement aimed at expanding solar-powered cold storage in Kenya, seeking to address an estimated $2.1 billion infrastructure gap.

The portfolio guarantee from UNCDF will allow Absa to expand asset-based lending to companies investing in cold-chain infrastructure, including businesses operating across the horticulture, dairy, fisheries and meat sectors.

Under the arrangement, Absa will provide between $500,000 and $2 million in financing to agricultural aggregators, equipment suppliers, exporters and other large value-chain companies. The borrowers will deploy solar-powered cold-storage systems serving smallholder farmers and agribusinesses.

The financing is designed to reduce the risks associated with lending to cold-chain projects, where high upfront equipment costs and perceived market risks have limited access to commercial capital.

The initiative forms part of the second phase of a cold-chain services program being implemented by UNCDF and UNDP with support from the Mitigation Action Facility. A first phase found demand for solar-powered cold storage and was projected to reach more than 60,000 farmers and create about 1,200 jobs.

Kenya’s agriculture sector accounts for about a quarter of gross domestic product and employs more than 40% of the population, according to the Kenya National Bureau of Statistics. About 40% of agricultural production is estimated to be lost annually because of inadequate post-harvest handling and storage, according to the partners.

“Through this partnership with UNCDF and UNDP, we are unlocking innovative financing that empowers agribusinesses to invest in cold storage infrastructure, strengthening food security and improving livelihoods,” Renato D’Souza, business banking director at Absa Bank Kenya, said in a statement.

The lending will use the cold-storage equipment as collateral, alongside the UNCDF guarantee. The structure is intended to allow companies to finance equipment while reducing the amount of risk carried by the bank.

UNCDF said the guarantee is intended to catalyze private investment in Kenya’s cold-chain infrastructure as demand for storage is expected to increase through 2030.

“Through this portfolio guarantee, UNCDF is helping to de-risk lending and unlock private sector financing for solar-powered cold storage solutions,” Omon Ukpoma-Olaiya, UNCDF regional investment team lead for East and Southern Africa and the Arab States, said.

UNDP will support policy engagement, technical assistance and coordination among industry participants, while UNCDF will provide risk-sharing and blended-finance instruments.

The partners said the use of solar-powered equipment could also help extend cold-chain infrastructure into rural areas where reliable electricity remains limited, while supporting Kenya’s climate commitments and reducing food losses.

The agreement comes as Kenya seeks to attract more private capital into agricultural infrastructure, with cold storage viewed as a key link between farmers, processors, exporters and domestic markets.