Farmers and rural businesses across East Africa are set to access Sh25.9 billion in financing to invest in climate-resilient agriculture under a new 12-year programme launched in Kigali, Rwanda.
The Africa Rural Climate Adaptation Finance Mechanism (ARCAFIM), launched by the International Fund for Agricultural Development (IFAD) and Equity Group, will operate in Kenya, Uganda, Tanzania and Rwanda.
The programme is targeting about 260,000 smallholder farmers and 500 rural businesses, with women expected to make up at least half of the beneficiaries and youth 30 per cent.
ARCAFIM has a lending capital of about Sh23.3 billion and a further Sh2.6 billion for technical assistance. The lending component is expected to generate about Sh34.5 billion in loans as the funds revolve through roughly four investment cycles.
Equity Group will provide half of the lending capital from its own balance sheet, matching concessional funding from development partners. The arrangement is designed to encourage commercial lenders to treat climate adaptation as a viable area of business rather than relying on grants alone.
The financing will support investments aimed at protecting agricultural production from climate shocks, including irrigation and water harvesting, resilient livestock, post-harvest storage, renewable energy and climate-resilient agro-processing.
IFAD Vice President Dr Gérardine Mukeshimana said the programme was designed to make climate adaptation financing a sustainable business for financial institutions.
“ARCAFIM’s ambition is to make rural climate adaptation a recognizable, viable and sustainable business line for African financial institutions,” she said.
The programme will also help farmers, rural enterprises and participating financial institutions identify suitable adaptation investments and build the skills needed to finance them.
Equity Group Managing Director and Chief Executive Officer Dr James Mwangi said putting the bank's own capital alongside concessional funding would help change how smallholder farmers are viewed by financial institutions.
“By committing our own balance sheet alongside concessional capital, we are not funding a project — we are building a market,” Mwangi said.
Equity Bank Kenya Managing Director Moses Nyabanda said the bank would provide financing directly as well as through microfinance institutions, SACCOs and agricultural value-chain companies.
The programme is backed by the Green Climate Fund, Finland’s Ministry for Foreign Affairs, the Nordic Development Fund, Denmark and the European Union.
The Green Climate Fund has committed US$55 million to the mechanism, which is expected to strengthen access to adaptation finance for smallholder farmers and rural businesses.
ARCAFIM is also expected to generate lessons that can be used to expand blended climate finance models to other parts of Africa. Southern and West Africa have been identified as possible future regions for replication.
The launch brought together representatives of governments, financial institutions, development partners and climate finance organisations from the four participating countries.