$200 <a href="https://absafricatv.com/verod-kepple-ventures-raises-us60-million/” title=”Verod-Kepple Ventures Raises US$60 Million”>Million Climate Fund Backs East Africa’s Rural Farmers
Equity Group Managing Director and Chief Executive Officer Dr James Mwangi said smallholder farmers should be seen as entrepreneurs working in an exceptionally demanding risk environment.
- Country:
- Rwanda
Smallholder farmers across East Africa are being offered a new route to finance climate-resilient agriculture through the Africa Rural Climate Adaptation Finance Mechanism, known as ARCAFIM. Launched by the International Fund for Agricultural Development and Equity Group at the Africa Food Systems Forum 2026 in Kigali, the US$200 million initiative will support farmers and rural businesses struggling to secure affordable capital for investments that could protect their livelihoods from drought, erratic rainfall, rising temperatures and other climate pressures.
Backed by the Green Climate Fund, Finland’s Ministry for Foreign Affairs, the Nordic Development Fund, Denmark and the European Union, ARCAFIM will operate for 12 years across Kenya, Uganda, Tanzania and Rwanda. Its larger purpose is to turn climate adaptation lending into a regular and commercially sustainable part of African banking, giving rural borrowers access to finance without treating them as recipients of charity.
Public and Private Capital Share the Risk
ARCAFIM combines US$180 million in lending capital with nearly US$20 million in technical assistance. The lending pool is expected to revolve through roughly four investment cycles, producing an estimated US$266 million in loans for smallholder farmers and micro, small and medium-sized rural enterprises working across food systems.
Equity Group is contributing US$90 million from its balance sheet, matching concessional funding on a one-for-one basis. International financing partners will absorb an initial first-loss layer, a second layer will be shared with the bank, and Equity will carry the senior risk. This structure gives the commercial bank a direct stake in the portfolio while reducing enough uncertainty to make lending possible for farmers and businesses often considered too risky by conventional financial institutions.
A detailed climate adaptation taxonomy will guide lenders and borrowers toward investments that can produce measurable resilience. Gérardine Mukeshimana, IFAD Vice President, described the mechanism as a way to make rural adaptation a recognizable and sustainable business line, supported by financial products, practical systems and institutional experience that banks can continue using after concessional re
Finance Reaches Farms Through Local Institutions
The programme expects to provide financing to nearly 260,000 smallholder producers and 500 rural MSMEs, with women representing at least half of all beneficiaries and young people accounting for 30 per cent. Its investments could strengthen food security for approximately 1.2 million people and deliver direct or indirect benefits to an estimated 1.5 million people.
Equity Bank will lend directly to farmers and agricultural producers while working through microfinance institutions, savings and credit cooperatives, rural enterprises and agricultural value-chain companies. Financing may support irrigation, water harvesting, resilient dairy and livestock production, renewable energy, post-harvest storage and climate-smart agro-processing, helping borrowers protect production, reduce losses and build higher incomes.
The technical assistance fund sits at the centre of the programme’s financial model. Participating lenders will learn how to identify, evaluate and manage climate adaptation loans, while farmers and businesses will receive guidance on choosing investments suited to the risks affecting their land, operations and local markets.
Building a Climate Lending Market That Can Last
Equity Group Managing Director and Chief Executive Officer Dr James Mwangi said smallholder farmers should be seen as entrepreneurs working in an exceptionally demanding risk environment. By committing its own capital, the bank is helping build a market where financing resilience becomes ordinary banking activity, and rural borrowers are recognized as commercially
The Green Climate Fund is contributing US$55 million and helped structure the mechanism to attract substantial commercial investment. Partners from Finland and the Nordic Development Fund also highlighted ARCAFIM’s ability to use public funding, shared risk and private capital to increase investment in climate-resilient agriculture.
Success will be measured by whether participating financial institutions continue offering adaptation loans once the programme’s concessional funding has been spent. Lessons from East Africa could support similar blended-finance models elsewhere, with IFAD and Equity Group identifying Southern and West Africa as possible regions for future expansion.
