Uganda to Access Shs755 Billion Climate Finance for Farmers

A significant climate finance initiative, the Africa Rural Climate Adaptation Finance Mechanism (ARCAFIM), has been launched to support agricultural resilience in Uganda and three other East African nations. This private sector-led program, a collaboration between the International Fund for Agricultural Development (IFAD) and Equity Group, is designed to provide financial and technical assistance to approximately 260,000 smallholder farmers and 500 rural micro, small, and medium-sized enterprises (MSMEs).

The 12-year program will focus on enabling climate adaptation investments such as improved irrigation, water harvesting, enhanced livestock resilience, better post-harvest storage solutions, renewable energy adoption, and climate-smart agro-processing. A key objective is to ensure at least half of the beneficiaries are women and 30 percent are youth, fostering inclusive growth.

ARCAFIM combines $180 million in lending capital with $20 million for technical assistance. The lending capital is structured to revolve through multiple investment cycles, potentially generating over $266 million in loans for food system participants in the region. Equity Group is contributing $90 million, matching concessional funding on a one-to-one basis, with a risk-sharing structure involving commercial and development partners.

Officials emphasized that the mechanism aims to shift the perspective of financial institutions, viewing climate-resilience lending as a viable commercial venture rather than solely charitable aid. Technical assistance will be crucial in helping local financial institutions develop and manage climate adaptation loans, while also guiding farmers and agribusinesses in identifying resilient investment opportunities.

The initiative is co-financed by the Green Climate Fund, Finland’s Ministry for Foreign Affairs, and the Nordic Development Fund, with additional support from Denmark and the European Union. The long-term success will be measured by whether climate-resilience lending becomes a standard practice for financial institutions beyond the initial concessional funding period. Plans are already in motion to assess expansion into Southern and West Africa based on the lessons learned from this East African program.