Equity Group has announced the launch of a KSh25.9 billion financing mechanism with the International Fund for Agricultural Development (IFAD) to help smallholder farmers and rural businesses in East Africa invest in climate adaptation.
In a statement on September 8, Equity said the Africa Rural Climate Adaptation Finance Mechanism (ARCAFIM) was launched on Tuesday at the Africa Food Systems Forum in Kigali, Rwanda.
The initiative will provide financing to farmers and rural businesses in Kenya, Uganda, Tanzania and Rwanda, targeting approximately 260,000 smallholder producers and 500 rural micro, small and medium-sized enterprises (MSMEs).
At least 50 per cent of the intended beneficiaries will be women, while 30 per cent will be young people.
How the KSh25.9 Billion Fund Will Work
ARCAFIM will operate for 12 years and comprises KSh23.3 billion in lending capital and approximately KSh2.6 billion in technical assistance.
The lending capital is expected to be reused across four investment cycles, providing about KSh34.4 billion in loans to farmers and rural MSMEs across East Africa’s food systems.
Equity Group will contribute KSh11.7 billion from its own balance sheet, matching the concessional funding one-to-one.
The financing structure will also spread lending risks among Equity and international financing partners, with different layers of credit protection covering potential losses.
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The Green Climate Fund (GCF), the Ministry for Foreign Affairs of Finland and the Nordic Development Fund support the mechanism, alongside co-financing from the Government of Denmark and the European Union.
Farmers to Receive Financing for Climate Adaptation
The programme will support investments designed to help farmers withstand the effects of climate change while improving productivity and incomes.
Equity said the financing will cover areas including irrigation and water harvesting, livestock and dairy resilience, post-harvest storage, renewable energy and climate-resilient agro-processing.
The technical assistance component will also help microfinance institutions and Savings and Credit Cooperative Organisations (SACCOs) develop the capacity to provide climate adaptation loans.
Farmers and rural businesses will receive technical support to identify investments that can provide practical protection against climate-related risks.
Overall, ARCAFIM is expected to strengthen food security for about 1.2 million people and benefit an estimated 1.5 million people directly and indirectly.
IFAD Vice President Gérardine Mukeshimana said the initiative was designed to turn climate adaptation into a sustainable business area for African financial institutions.
“ARCAFIM’s ambition is to make rural climate adaptation a recognisable, viable and sustainable business line for African financial institutions,” Mukeshimana said.
Equity Seeks to Make Climate Lending a Normal Banking Business
Equity Group Managing Director and Chief Executive Officer James Mwangi said the initiative was designed to change how financial institutions view smallholder farmers and rural businesses.
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“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 funding was intended to create a sustainable market for climate-resilience financing rather than a short-term project.
Equity Bank Kenya Managing Director Moses Nyabanda said the bank would provide financing directly to farmers and agricultural producers while also working through microfinance institutions, SACCOs and value-chain companies.
He said the programme would help farmers and agricultural businesses adapt to climate change, increase production, grow their incomes and become more resilient.
Kenya Among Four Beneficiary Countries
Kenya is one of the four countries where ARCAFIM will initially operate.
The mechanism will channel funding through financial institutions and agricultural value chains, helping farmers and rural businesses access financing for climate-related investments.
The Green Climate Fund has committed KSh7.1 billion to the initiative.
GCF Director of the Department of Africa Region Catherine Koffman said the fund’s contribution would help mobilise additional commercial investment from Equity Group and expand access to climate adaptation finance.
The partners aim for climate-resilience lending to continue as a normal commercial banking service after the concessional funding is exhausted.
IFAD and Equity Group have also identified Southern and West Africa as potential regions where the model could be replicated in the future.
The agreements were signed by Mukeshimana on behalf of IFAD and Nyabanda for Equity Bank Kenya during a ceremony presided over by Equity Bank Rwanda Managing Director Hannington Namara.
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