Smallholder farmers and rural businesses in Kenya, Uganda, Tanzania and Rwanda are set to access financing for irrigation, water harvesting, better storage and other investments intended to protect agricultural production from worsening climate shocks.
This is after Equity Group and the International Fund for Agricultural Development (IFAD) launched a $200 million (KES 25.8 billion) financing mechanism targeting farmers and agricultural enterprises that often struggle to obtain conventional bank loans.
The programme known as Africa Rural Climate Adaptation Finance Mechanism (ARCAFIM) will operate for 12 years and use a mixture of concessional and commercial capital. Its practical test will be whether it makes climate-resilience investments affordable and accessible to farmers exposed to droughts, floods, erratic rainfall and rising production costs.
The facility consists of $180 million in lending capital and about $20 million for technical assistance. Equity will contribute $90 million from its balance sheet, matching the concessional lending capital provided by IFAD.
The financing will support investments such as irrigation and rainwater harvesting systems, climate-resilient livestock and dairy production, post-harvest storage, renewable energy and agricultural processing designed to withstand climate-related disruptions.
The programme plans to reach about 260,000 smallholder producers and 500 rural micro, small and medium-sized enterprises across the four countries, with at least half of the beneficiaries expected to be women and 30 per cent young people.
“Through ARCAFIM, we will finance smallholder farmers and agricultural producers directly and through microfinance institutions, SACCOs and value-chain companies, while extending financing to rural MSMEs,” Equity Bank Kenya Managing Director Moses Nyabanda said.
The facility also includes training for lenders, farmers and rural businesses. Financial institutions will be helped to identify viable climate-adaptation projects, while borrowers will receive technical guidance on selecting investments suited to their production risks.
IFAD Vice-President Gérardine Mukeshimana said the programme seeks to make rural climate adaptation a viable and permanent area of business for African financial institutions.
If the East African phase succeeds, IFAD and Equity say the model could be extended to Southern and West Africa.
