Equity puts $90m of its own money behind a $200m climate finance mechanism for East Africa
Equity Group and the International Fund for Agricultural Development (IFAD) have launched a $200 million (about Sh25.9 billion) financing mechanism to expand access to climate adaptation finance for smallholder farmers and rural businesses across East Africa.
The Africa Rural Climate Adaptation Finance Mechanism (ARCAFIM) is a 12-year programme covering Kenya, Uganda, Tanzania and Rwanda. It is designed to address a financing gap facing farmers and rural businesses that need capital to invest in measures that can reduce their exposure to climate-related risks.
ARCAFIM comprises $180 million (about Sh23.3 billion) in lending capital and approximately $20 million (Sh2.6 billion) in technical assistance. The technical assistance will provide participating financial institutions, farmers and rural enterprises with expertise and training to identify and finance viable climate adaptation investments.
Equity Group will contribute $90 million of the $180 million lending base from its own balance sheet, matching the concessional contribution to the lending pool.
The lending capital is expected to revolve through roughly four investment cycles, generating about $266 million (Sh34.5 billion) in loans to smallholder farmers and micro, small and medium-sized enterprises over the programme’s lifetime.
ARCAFIM targets 260,000 farmers
The programme aims to provide financing to approximately 260,000 smallholder producers and 500 rural MSMEs across the four countries.
At least 50 per cent of the intended beneficiaries will be women, while 30 per cent will be youth. IFAD and Equity expect the programme to strengthen food security for about 1.2 million people and benefit approximately 1.5 million people directly and indirectly.
In Kenya, Equity Bank will provide financing directly to agricultural producers and rural businesses while also working through microfinance institutions, SACCOs and agricultural value-chain companies.
The financing will support investments including irrigation and water harvesting, livestock and dairy resilience, post-harvest storage, renewable energy and climate-resilient agro-processing.
The technical assistance component will help lenders and borrowers identify investments that can provide practical protection against climate-related risks, alongside building the capacity of participating financial institutions to originate adaptation lending.
Equity takes part of the lending risk
A key feature of ARCAFIM is its risk-sharing structure.
International financing partners will provide credit protection through a first-loss layer, while a mezzanine layer will be shared with Equity. The bank will carry the senior risk within the portfolio.
The structure is intended to reduce some of the risks associated with agricultural lending while keeping a commercial financial institution exposed to the performance of the loans.
That risk-sharing model is central to ARCAFIM’s longer-term objective: making climate adaptation lending a sustainable commercial product for African financial institutions rather than a financing programme dependent on concessional capital.
“The ambition is to make rural climate adaptation a recognizable, viable and sustainable business line for African financial institutions,” said Gérardine Mukeshimana, Vice President at IFAD.
Mukeshimana said ARCAFIM would provide tailored financial products and a climate adaptation financing taxonomy to give participating institutions the experience, systems and confidence to continue expanding adaptation finance.
The mechanism starts in East Africa but is designed to be adapted and replicated in other parts of Africa.
Equity wants to build a climate-resilience lending market
Equity Group Managing Director and Chief Executive Officer James Mwangi said the bank’s decision to commit its own balance sheet alongside concessional capital is intended to build a commercial market for climate-resilience lending.
“By committing our own balance sheet alongside concessional capital, we are building a market, one in which lending climate resilience becomes an ordinary banking business rather than an act of charity,” Mwangi said.
Equity Bank Kenya Managing Director Moses Nyabanda said the bank would finance farmers and agricultural producers directly and through microfinance institutions, SACCOs and value-chain companies, while also extending financing to rural MSMEs.
The mechanism is backed by the Green Climate Fund, the Ministry for Foreign Affairs of Finland and the Nordic Development Fund, with additional co-financing from Denmark and the European Union.
The Green Climate Fund has committed $55 million to ARCAFIM, while Finland is providing a $30 million returnable capital contribution.
The programme was launched in Kigali during the Africa Food Systems Forum 2026, bringing together representatives from governments, financial institutions, development partners, climate-finance institutions and private-sector investors.
IFAD and Equity have identified Southern and West Africa as potential regions for future replication.
The longer-term question for ARCAFIM is whether blended climate finance can help make investment in climate resilience a routine part of agricultural lending, giving farmers and rural businesses access to capital for adaptation while creating a model that financial institutions can continue using after concessional funding is exhausted.
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