KIGALI, Rwanda — The International Fund for Agricultural Development (IFAD) and Equity Group have launched a US$200 million climate adaptation finance mechanism aimed at helping smallholder farmers and rural businesses in East Africa cope with the effects of climate change.
The Africa Rural Climate Adaptation Finance Mechanism (ARCAFIM) was launched at the Africa Food Systems Forum 2026 in Kigali, Rwanda, as concerns persist over the difficulty smallholder farmers and rural enterprises face in accessing financing for climate resilience.
The 12-year mechanism will operate in Uganda, Kenya, Tanzania and Rwanda, targeting approximately 260,000 smallholder producers and 500 rural micro, small and medium-sized enterprises (MSMEs).
At least 50 percent of the intended beneficiaries will be women, while 30 percent will be youth.
ARCAFIM is structured around US$180 million in lending capital and approximately US$20 million in technical assistance. The lending capital is expected to revolve through about four investment cycles, potentially generating approximately US$266 million in loans to farmers and rural businesses across East Africa’s food systems.
Of the US$180 million lending base, US$90 million will come from Equity Group’s own balance sheet, matching the concessional contribution on a one-to-one basis.
The mechanism uses a risk-sharing structure in which international financing partners provide a first-loss layer, a mezzanine layer is shared with the bank, while Equity Group carries the senior risk.
The programme will finance investments aimed at helping rural communities and businesses withstand climate-related shocks, including irrigation and water harvesting, dairy and livestock resilience, post-harvest storage, renewable energy and climate-resilient agro-processing.
The technical assistance component will also build the capacity of participating microfinance institutions and SACCOs to provide climate adaptation financing and help farmers identify investments that can effectively protect their livelihoods.
IFAD Vice President Dr. Gérardine Mukeshimana said the success of climate adaptation finance would depend on translating global commitments into tangible investments in rural communities.
“ARCAFIM’s ambition is to make rural climate adaptation a recognizable, viable and sustainable business line for African financial institutions,” Mukeshimana said.
She added that the mechanism would provide financial institutions with the experience, systems and confidence needed to expand climate adaptation financing beyond the programme.
Equity Group Managing Director and Chief Executive Officer Dr. James Mwangi said ARCAFIM would change how financial institutions view 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 aimed at building a sustainable market for climate-resilience financing rather than simply funding a temporary project.
The programme is expected to strengthen food security for approximately 1.2 million people and benefit an estimated 1.5 million people directly and indirectly.
ARCAFIM is being supported by the Green Climate Fund (GCF), the Ministry for Foreign Affairs of Finland and the Nordic Development Fund, with additional co-financing from the Government of Denmark and the European Union.
The GCF has committed US$55 million to the mechanism.
Catherine Koffman, Director of the Department of Africa Region at the Green Climate Fund, said ARCAFIM demonstrates how catalytic climate finance can mobilise commercial investment in climate-resilient agriculture.
The launch brought together representatives from IFAD, financial institutions, governments of Uganda, Kenya, Tanzania and Rwanda, private-sector investors, development partners and climate finance institutions.
The agreements were signed by Mukeshimana on behalf of IFAD and Moses Nyabanda, Managing Director of Equity Bank Kenya, in a ceremony presided over by Hannington Namara, Managing Director of Equity Bank Rwanda.
IFAD and Equity Group said the ultimate goal is to make climate adaptation lending a sustainable commercial business line for African financial institutions, even after concessional funding is exhausted.
The partners have identified Southern and West Africa as potential next regions where the model could be replicated.
