A $200 million financing facility launched in Kigali on Friday will seek to make climate adaptation lending more accessible to smallholder farmers and rural businesses in four East African countries.
The Africa Rural Climate Adaptation Finance Mechanism (ARCAFIM), backed by the International Fund for Agricultural Development (IFAD) and Equity Group, will finance investments in Rwanda, Kenya, Uganda and Tanzania over 12 years.
The initiative is designed to address a financing gap facing farmers and rural businesses seeking to invest in measures that can make agriculture more resilient to climate change.
ARCAFIM will provide $180 million in loans and about $20 million in technical assistance. The lending will use a blended-finance model intended to reduce risks for financial institutions and attract more private capital into climate adaptation.
Equity Group will contribute $90 million from its own resources, with investment partners providing a matching amount through concessional financing.
The Green Climate Fund has committed $55 million to the initiative, while Finland’s Ministry for Foreign Affairs and the Nordic Development Fund are also partners. The programme is additionally supported by the governments of Denmark and the European Union.
The facility is expected to reach about 260,000 smallholder farmers and 500 small and medium-sized rural businesses. Women are expected to account for at least half of the beneficiaries, while young people will make up 30%.
The financing will support irrigation and water management, livestock production, post-harvest storage, renewable energy and environmentally sustainable agricultural processing.
IFAD Vice President Gérardine Mukeshimana said the programme would help financial institutions develop products suited to farmers while building their capacity to expand climate-related lending.
Equity Group Chief Executive James Mwangi said smallholder farmers should be treated as entrepreneurs rather than recipients of charity.
“What they lack is a financial system designed to support them,” Mwangi said, adding that ARCAFIM was intended to help build a sustainable market for climate-adaptation finance.
Equity Bank Kenya Chief Executive Moses Nyabanda said financing would reach farmers directly and through microfinance institutions, SACCOs and businesses across agricultural value chains.
IFAD and Equity Group said Southern and West Africa could be considered for future expansion of the programme.
