KIGALI, Rwanda — Equity Group and the International Fund for Agricultural Development (IFAD) have launched a US$200 million (about Sh25.8 billion) climate adaptation financing programme targeting smallholder farmers and rural businesses across East Africa.
The Africa Rural Climate Adaptation Finance Mechanism (ARCAFIM) was launched during the Africa Food Systems Forum 2026 in Kigali and is expected to provide financing to about 260,000 smallholder farmers and 500 rural micro, small and medium-sized enterprises (MSMEs).
The 12-year initiative will operate in Kenya, Uganda, Tanzania and Rwanda, with women expected to account for at least 50 per cent of beneficiaries and young people 30 per cent.
The programme seeks to help farmers and rural enterprises invest in measures that can protect their livelihoods, improve productivity and strengthen their ability to withstand climate-related shocks.
Sh25.8 billion financing model
ARCAFIM is backed by IFAD, Equity Group, the Green Climate Fund, Finland’s Ministry for Foreign Affairs, the Nordic Development Fund, the Government of Denmark and the European Union.
The mechanism comprises US$180 million (about Sh23.3 billion) in lending capital and approximately US$20 million (Sh2.5 billion) in technical assistance.
Because the lending capital is expected to revolve through approximately four investment cycles, the partners estimate that it could generate about US$266 million (Sh34.4 billion) in loans for smallholder farmers and rural businesses across East Africa.
Equity Group will contribute US$90 million (Sh11.6 billion) from its own balance sheet, matching the concessional contribution on a one-to-one basis.
The structure is intended to combine public and private capital while spreading some of the risks associated with lending to climate-vulnerable rural borrowers.
Programme targets 260,000 farmers
ARCAFIM is expected to finance investments designed to help farmers and rural enterprises adapt to changing weather patterns and climate-related risks.
The programme’s partners estimate that it will strengthen food security for approximately 1.2 million people and directly and indirectly benefit about 1.5 million people.
A major focus will be expanding access to financial products tailored to the needs of smallholder farmers, agricultural producers and rural enterprises.
The programme also aims to make climate adaptation financing commercially sustainable rather than dependent indefinitely on donor support.
IFAD seeks lasting climate-finance market
IFAD Vice President Dr Gérardine Mukeshimana said the success of climate adaptation finance would depend on turning global commitments into practical investments for rural communities.
“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,” Mukeshimana said.
She added that the mechanism could eventually be replicated beyond East Africa.
“The mechanism is starting in East Africa, but it is designed to be adapted and replicated across Africa.”
The approach reflects a broader effort to persuade commercial financial institutions to treat climate adaptation as a viable lending market rather than solely as a development-finance intervention.
Equity commits its own balance sheet
Equity Group Managing Director and Chief Executive Officer Dr James Mwangi said the programme would change how financial institutions approach smallholder farmers and rural borrowers.
“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,” Mwangi said.
He said Equity’s decision to commit its own balance sheet alongside concessional capital was intended to create a sustainable market for climate-resilient lending.
“By committing our own balance sheet alongside concessional capital, we are not funding a project. We are building a market, one in which lending for climate resilience becomes an ordinary banking business rather than an act of charity.”
Equity Bank Kenya to finance farmers directly
Equity Bank Kenya Managing Director Moses Nyabanda said the bank would provide financing to smallholder farmers and agricultural producers both directly and through financial and agricultural organisations.
These include microfinance institutions, SACCOs and agricultural value-chain companies.
“The goal is simple: enable farmers and agricultural businesses to adapt, increase production, grow revenues and incomes, and become more resilient to the effects of climate change,” Nyabanda said.
The distribution model is intended to reach rural borrowers through institutions that already have relationships with farmers and agricultural enterprises.
Green Climate Fund commits Sh7 billion
The Green Climate Fund has committed US$55 million (about Sh7 billion) to ARCAFIM.
Catherine Koffman, the fund’s Africa Regional Director, described the programme as an example of how public and private financing can be combined to increase investment in climate-resilient agriculture.
The concessional financing is designed to share lending risks between international partners and Equity Group.
Under the structure, concessional capital provides protection against initial losses, while Equity assumes a significant portion of the lending risk.
The arrangement is intended to encourage greater private-sector participation in a segment of the economy often considered risky because farmers and rural businesses can be particularly vulnerable to droughts, floods and other climate-related shocks.
Technical support for SACCOs and MFIs
ARCAFIM will also provide technical assistance beyond the loans themselves.
The US$20 million technical-assistance component will help participating microfinance institutions and SACCOs build their capacity to develop and provide climate-adaptation financing.
Farmers and rural businesses will also receive support to identify investments that can protect their livelihoods from changing weather patterns and climate-related shocks.
Potential adaptation investments could include measures that improve production resilience, resource efficiency and the ability of rural businesses to withstand disruptions.
The programme’s long-term success will depend not only on the amount of financing disbursed but also on whether those investments generate sufficient returns for borrowers to repay loans and continue accessing commercial finance.
From concessional finance to commercial lending
IFAD and Equity Group said their long-term objective is to establish climate-adaptation lending as a permanent and commercially viable business line for African financial institutions.
The partners hope the model will continue operating even after concessional financing has been exhausted.
This would mark a shift from climate finance being treated primarily as donor-supported intervention to becoming part of mainstream banking.
The revolving structure is central to that ambition because the same lending capital is expected to support multiple investment cycles.
The partners estimate that the initial lending capital could generate approximately US$266 million in loans over the programme period through the planned investment cycles.
