KIGALI, Sept. 5 (Xinhua) -- The International Fund for Agricultural Development (IFAD) and Equity Group on Friday launched the Africa Rural Climate Adaptation Finance Mechanism (ARCAFIM), a 200-million-U.S.-dollar financing mechanism aimed at expanding access to climate adaptation finance for smallholder farmers and rural businesses in East Africa, IFAD said in a statement.
The financing mechanism was launched on the sidelines of the Africa Food Systems Forum in the Rwandan capital Kigali. It is designed to address the persistent gap between climate finance commitments and the capital reaching rural communities, according to the statement.
It is being implemented by IFAD and Equity Group, with support from the Green Climate Fund, the Ministry for Foreign Affairs of Finland, the Nordic Development Fund, Denmark and the European Union.
The 12-year mechanism comprises 180 million U.S. dollars in lending capital and about 20 million U.S. dollars for technical assistance, with the lending capital expected to generate about 266 million dollars in loans through four investment cycles.
ARCAFIM will operate in Rwanda, Kenya, Uganda and Tanzania, with the ambition of reaching about 260,000 smallholder farmers and 500 rural micro, small and medium-sized enterprises (MSMEs), according to the statement.
At least 50 percent of the intended beneficiaries will be women and 30 percent youth. The initiative is expected to strengthen food security for about 1.2 million people and benefit an estimated 1.5 million people directly and indirectly by supporting investments in climate-resilient agriculture and rural businesses.
Speaking at the launch, IFAD Vice President Gerardine Mukeshimana said the success of climate adaptation finance would depend on turning 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. 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 is quoted as saying in the statement.
James Mwangi, Chief Executive Officer of Equity Group Holdings, said the mechanism would help change the way financial institutions view smallholder farmers by treating them as entrepreneurs and bankable clients.
He said Equity Group's commitment of 90 million U.S. dollars from its own balance sheet would help build a sustainable market for climate-resilient lending rather than a temporary financing program. ■