The International Fund for Agricultural Development (IFAD) and Equity Group have launched a US$200 million (about Sh25.9 billion) climate finance mechanism for smallholder farmers and rural businesses in East Africa. The Africa Rural Climate Adaptation Finance Mechanism (ARCAFIM) was announced at the Africa Food Systems Forum in Kigali, Rwanda.
The 12-year private sector-led programme is designed to close the financing gap for climate adaptation in farming. It will operate in Kenya, Uganda, Tanzania and Rwanda, with the long-term aim of replication in other parts of Africa.
How the Mechanism Is Structured
ARCAFIM comprises:
- US$180 million (Sh23.3 billion) in lending capital
- about US$20 million (Sh2.6 billion) for technical assistance and training
Equity Group is contributing US$90 million from its own balance sheet, matching the concessional capital provided by international partners on a one-to-one basis. The lending capital is expected to revolve through about four investment cycles, generating roughly US$266 million (about Sh34.5 billion) in cumulative loans.
Partners include the Green Climate Fund (US$55 million commitment), the Nordic Development Fund, the European Union, and the governments of Finland and Denmark.
Who Will Benefit
The programme aims to reach approximately:
- 260,000 smallholder producers
- 500 rural micro, small and medium-sized enterprises (MSMEs)
At least 50 per cent of beneficiaries are expected to be women and 30 per cent youth. Partners project that the initiative will strengthen food security for about 1.2 million people and benefit an estimated 1.5 million people directly and indirectly.
What the Financing Can Support
Loans will support climate-resilient investments that help farms and rural businesses withstand droughts, floods and other shocks. Eligible uses include:
- Irrigation and water harvesting systems
- Post-harvest storage and cold chain solutions
- Renewable energy for processing and farm equipment
- Climate-smart agro-processing and livestock resilience measures
Beyond direct lending by Equity Bank, the technical assistance component will build capacity in local microfinance institutions and SACCOs so they can continue originating climate adaptation loans after the programme ends.
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How Farmers and MSMEs Will Access Financing
Farmers and rural enterprises will access financing through participating financial institutions as ARCAFIM-backed lending products are rolled out.
Specific eligibility requirements, loan products, pricing and application procedures will be determined by Equity and other participating financial institutions as the mechanism is implemented. Interested farmers, MSMEs, SACCOs and microfinance institutions should follow announcements from Equity Group and IFAD, or contact their nearest Equity Bank branch for updates once products become available.
Why It Matters
Equity Group CEO James Mwangi said the bank is putting its own capital on the line to turn climate-resilience lending into ordinary banking business rather than charity. IFAD Vice President Gérardine Mukeshimana said the goal is to give financial institutions the systems and confidence to keep expanding adaptation finance long after concessional funding ends.
The Green Climate Fund’s Catherine Koffman described ARCAFIM as an example of how public climate finance can mobilise larger commercial capital for smallholder farmers.
Bottom Line
IFAD and Equity Group have launched a US$200 million (Sh25.9 billion), 12-year climate finance mechanism for East African smallholder farmers and rural MSMEs. Equity is matching concessional capital with US$90 million from its balance sheet. The programme targets 260,000 producers and 500 rural enterprises in Kenya, Uganda, Tanzania and Rwanda, with strong focus on women and youth, and aims to strengthen food security for more than a million people.
Success will depend on how quickly ARCAFIM-backed products reach farmers on the ground and whether climate-resilient lending becomes a normal part of rural banking after the programme ends.
Sources:
Business Daily – Equity, IFAD target farmers with Sh25.8bn climate financing;
Citizen Digital – Equity Bank, IFAD launch Ksh.25.8B climate financing;
Capital FM / allAfrica – Sh25.9bn Climate Fund Launched;
The Kenya Times;
IFAD and Equity Group statements. Specific loan terms will be set by participating institutions as the mechanism is rolled out. This article is for information only and is not financial advice.