Navigating climate change and financial challenges: a study of agricultural finance in Albania

Albania’s agriculture sector is a cornerstone of the country’s rural livelihoods and food security, yet it remains highly vulnerable to climate change and financial constraints. While awareness of climate risks among farmers is high, their capacity to adapt is severely limited by structural and financial barriers. Key obstacles include prohibitively high lending costs, insufficient collateral, fragmented landholdings, low financial literacy and weak insurance coverage. As a result, many farmers rely on personal savings, informal loans and remittances to cope with shocks.

To address these challenges, this paper recommends a comprehensive approach that focuses on improving financial inclusion, strengthening institutions, prioritising climate-smart investments, advancing policy reforms and fostering regional cooperation. Such concerted efforts will not only advance national agricultural development and food security goals, but also help Albania meet its commitments under the EU integration process and global climate agreements, securing a more sustainable future for its rural communities.

Recommendations

• Enhance financial inclusion. Affordable financing options for smallholders and agribusinesses need to be expanded. This includes developing tailored credit products; improving financial literacy and outreach; and scaling up agricultural insurance and risk-sharing mechanisms.

• Strengthen institutional capacity. Banks and microfinance institutions should be encouraged and trained to better assess agricultural projects and integrate climate risk considerations into lending.

• Prioritise climate-smart investments. Public and private investment should be directed towards climate-resilient infrastructure and technologies in the agricultural sector.

• Advance policy and land reforms. Policy changes that create an enabling environment for sustainable, climate-friendly agriculture need to be implemented.

• Foster regional cooperation and knowledge exchange. Regional initiatives and partnerships should be leveraged to strengthen Albania’s climate adaptation and agricultural finance capabilities and practices.