US$200M Climate Fund Targets East Africa’s Farmers

The 12-year initiative will support 260,000 smallholder producers and 500 rural businesses across four East African countries.

Smallholder farmers across East Africa could gain better access to climate finance through a new US$200 million initiative.

The International Fund for Agricultural Development (IFAD) and Equity Group launched the Africa Rural Climate Adaptation Finance Mechanism (ARCAFIM) at the Africa Food Systems Forum 2026 in Kigali.

The 12-year mechanism targets farmers and rural businesses in Kenya, Uganda, Tanzania and Rwanda.

Financing Climate Resilience

ARCAFIM combines US$180 million in lending capital with about US$20 million for technical assistance.

The lending capital could generate about US$266 million in loans through four investment cycles.

Importantly, Equity Group will commit US$90 million from its own balance sheet. This matches the concessional funding on a one-for-one basis.

The financing will support investments that help farmers manage climate risks. These include irrigation, water harvesting, livestock resilience, storage and renewable energy.

Reaching Farmers and Rural Businesses

The programme aims to finance about 260,000 smallholder producers and 500 rural MSMEs.

At least 50% of beneficiaries will be women. Youth will account for 30% of the target beneficiaries.

As a result, the initiative could strengthen food security for about 1.2 million people. It could also benefit an estimated 1.5 million people directly and indirectly.

Equity Bank Kenya will provide financing directly and through microfinance institutions, SACCOs and value chain companies.

Moses Nyabanda, Managing Director of Equity Bank Kenya, said the goal is to help farmers adapt, increase production and grow their incomes.

Building a Long-Term Climate Finance Market

ARCAFIM also aims to make climate adaptation lending a normal banking business.

The mechanism includes a climate adaptation taxonomy. This will help financial institutions identify viable investments and develop suitable financing products.

Meanwhile, technical assistance will strengthen the ability of MFIs and SACCOs to provide climate adaptation loans.

IFAD Vice President Gérardine Mukeshimana said the initiative aims to build a sustainable business line for climate adaptation finance.

“ARCAFIM’s ambition is to make rural climate adaptation a recognizable, viable and sustainable business line for African financial institutions,” she said.

The Green Climate Fund has committed US$55 million to the mechanism. Finland, the Nordic Development Fund, Denmark and the European Union are also supporting the initiative.

For Equity Group, the model goes beyond funding individual projects. It seeks to build a market where climate resilience becomes part of everyday agricultural finance.

If successful, ARCAFIM could provide a model for expanding climate adaptation finance into other parts of Africa.