- IFAD and Equity launch a US$200 million climate finance mechanism.
- ARCAFIM targets 260,000 farmers and 500 rural businesses.
- Women and youth will make up at least 80 percent of beneficiaries.
The International Fund for Agricultural Development (IFAD) and Equity Group have launched the Africa Rural Climate Adaptation Finance Mechanism (ARCAFIM), a US$200 million (Ksh25.89 billion) private sector-led initiative.
The mechanism is aimed at closing the climate adaptation financing gap for smallholder farmers and rural businesses across East Africa.
It was unveiled at the Africa Food Systems Forum 2026 in Kigali, Rwanda.
ARCAFIM is convened with co-financiers including the Green Climate Fund, Finland’s Ministry for Foreign Affairs and the Nordic Development Fund, alongside additional financing from the Government of Denmark and the European Union.
The mechanism runs for 12 years and is structured in two parts: US$180 million (Ksh23.3 billion) in lending capital and approximately US$20 million (Ksh2.59 billion) in technical assistance.
Because the lending capital revolves over roughly four investment cycles, it is expected to generate around US$266 million (Ksh34.43 billion) in loans to micro, small and medium-sized enterprises (MSMEs) and smallholder farmers across East Africa’s food systems.
Of the US$180 million (Ksh23.3 billion) lending base, US$90 million (Ksh11.65 billion) comes from Equity Group’s own balance sheet, matching the concessional contribution one for one.
Credit protection is tranched across the portfolio, with international financing partners covering a first-loss layer, a mezzanine layer shared with the bank, and Equity Bank carrying the senior risk.
The programme will operate in Kenya, Uganda, Tanzania and Rwanda, targeting approximately 260,000 smallholder producers and 500 rural MSMEs.
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At least 50 percent of intended beneficiaries will be women and 30 percent youth. The initiative is expected to strengthen food security for approximately 1.2 million people and benefit an estimated 1.5 million people in total, directly and indirectly.
Speaking during the launch, IFAD Vice President Gérardine Mukeshimana said the success of climate adaptation finance will ultimately depend on its ability to translate global commitments into tangible investments in rural communities.
“Africa Rural Climate Adaptation Finance Mechanism (ARCAFIM)’s ambition is to make rural climate adaptation a recognizable, viable and sustainable business line for African financial institutions,” said Mukeshimana.
She added that the mechanism will offer tailored financial products and a climate adaptation financing taxonomy, helping participating institutions build the experience, systems and confidence needed to keep expanding adaptation finance.
While ARCAFIM is starting in East Africa, she noted that it has been designed for adaptation and replication across the continent.
The technical assistance component builds the capacity of participating microfinance institutions and Saccos to originate adaptation lending.
It also equips farmers and rural enterprises with the technical knowledge to identify investments in irrigation and water harvesting, dairy and livestock resilience, post-harvest storage, renewable energy, and climate-resilient agro-processing.
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Equity Group Holdings Group Managing Director and Chief Executive Officer Dr. James Mwangi said the mechanism reframes how African finance sees the rural borrower.
“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,” said Dr. Mwangi.
He also said that by committing its own balance sheet alongside concessional capital, Equity Group is not simply funding a project but building a market — one where lending for climate resilience becomes standard banking practice rather than charity. He said dignity starts with being recognised as bankable, and if the model succeeds in East Africa, it can be extended across the continent.
Equity Bank Kenya Managing Director Moses Nyabanda said the bank will play a direct role in translating climate adaptation finance into practical investments for farmers and agricultural value chain businesses.
“Through ARCAFIM, we will finance smallholder farmers and agricultural producers directly and through microfinance institutions, Saccos and value chain companies, while extending financing to rural MSMEs. We will also build capacity on climate adaptation finance and promote sustainable agricultural practices and technologies,” said Nyabanda.
He said the goal is simple: to help farmers and agricultural businesses adapt, boost production, grow revenues and incomes, and become more resilient to the effects of climate change.
Green Climate Fund Director of the Department of Africa Region Catherine Koffman said the fund’s US$55 million (Ksh7.12 billion) commitment helped structure a mechanism that mobilises substantial commercial investment from Equity Group.
Finland’s Ministry for Foreign Affairs Director General Juha Savolainen said strengthening agriculture’s resilience to climate change is a smart investment that benefits both communities and businesses.
Nordic Development Fund Managing Director Satu Santala said the fund’s support for ARCAFIM from its inception reflected the importance of building mechanisms capable of unlocking greater investment in climate adaptation.
The launch brought together representatives of IFAD and the financing institutions, alongside government representatives from Kenya, Uganda, Tanzania and Rwanda, private-sector investors, development partners and climate finance institutions.
The agreements were signed by Mukeshimana for IFAD and Nyabanda for Equity Bank Kenya, in a ceremony presided over by Equity Bank Rwanda Managing Director Hannington Namara.
By Benedict Aoya
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