Smallholder farmers to get relief from Equity Group

Access to climate adaptation finance remains a significant challenge for smallholder farmers and rural businesses across Africa, with available capital often failing to reach those who need it most. 

To help bridge this financing and delivery gap, the International Fund for Agricultural Development (IFAD) and Equity Group last Friday, kicked off the Africa Rural Climate Adaptation Finance Mechanism (ARCAFIM) – a $200 million, private sector-led mechanism built to close that gap for smallholder farmers across East Africa.

This was at the Africa Food Systems Forum in Kigali, Rwanda.  ARCAFIM is convened with the co-financiers of the Green Climate Fund, the ministry for Foreign Affairs of Finland and the Nordic Development Fund and also co-financed by the Government of Denmark and the European Union.

The mechanism runs for twelve years and is structured in two parts: US$180 million of lending capital and approximately $20 million of technical assistance. 

The programme will operate in Kenya, Uganda, Tanzania and Rwanda, with the ambition of providing financing to approximately 260,000 smallholder producers and 500 rural MSMEs. At least 50 per cent of the intended beneficiaries will be women and 30 per cent youth. 

The initiative is expected to strengthen food security for approximately 1.2 million people and to benefit an estimated 1.5 million people in total.

Speaking during the launch, Dr Gérardine Mukeshimana, vice president IFAD, said, “ARCAFIM’s ambition is to make rural climate adaptation a recognizable, viable and sustainable business line for African financial institutions. It will support tailored financial products and a climate adaptation financing taxonomy, so that participating institutions gain the experience, systems and confidence to continue expanding adaptation finance. The mechanism is starting in East Africa, but it is designed to be adapted and replicated across Africa.” 

Dr James Mwangi, Group managing director and CEO of Equity Group, said: “Africa’s smallholder farmers are not waiting to be rescued. They are entrepreneurs operating in the most demanding risk environment on earth, and what they have lacked is a financial system built to back them. ARCAFIM changes that equation.” 

“ARCAFIM is an important example of Green Climate Fund’s (GCF’s) catalytic role in bringing partners and capital together to scale up investment in climate-resilient agriculture. Through its $55 million commitment and close collaboration with IFAD and the program’s financing partners, GCF helped structure a mechanism that mobilizes substantial commercial investment from Equity Group and expands access to adaptation finance for smallholder farmers and rural businesses across East Africa.” said Catherine Koffman, director of the Department of Africa Region at the Green Climate Fund.

The initiative also seeks to generate practical lessons that can inform the replication of blended climate finance approaches in other regions of Africa facing similar challenges in financing climate resilience. 

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