The Africa Rural Climate Adaptation Finance Mechanism (ARCAFIM) [C140]

Africa

The Africa Rural Climate Adaptation Finance Mechanism (ARCAFIM)

Ref. NDF c140

NDF grant: EUR 500,000 Booster Grant

Project Period: July 2022 – January 2024

Implementing Agency: International Fund for Agricultural Development (IFAD)

Objective

The Africa Rural Climate Adaptation Finance Mechanism (ARCAFIM) is a programme being structured and launched by the International Fund for Agricultural Development (IFAD) to catalyse and scale up private sector climate change adaptation financing targeting smallholder producers and rural micro-, small- and medium-sized enterprises (MSME) in the agricultural sector in Africa.

By introducing new instruments into the mainstream financial sector, ARCAFIM contributes to achieving a paradigm shift towards financing models for increased resilience to climate change among low-income rural populations, particularly women and youth. NDF provided a Booster Grant of EUR 500,000 to co-finance with IFAD the preparation activities to design, structure and launch ARCAFIM.

Smallholder producers and rural MSMEs provide valuable jobs and income opportunities to rural low-income population in Africa. However, due to environmental, technical, economic, social and political factors, they are disproportionately experiencing the effects of climate change and have been struggling so far to attract sufficient financing and the necessary investments to adapt and build stronger resilience to climate change.

ARCAFIM will seek to address this market failure by catalysing and scaling up private sector climate adaptation financing targeting smallholders and rural MSMEs in the agricultural sector in four regions of Africa: East, South, West and North. ARCAFIM will be structured into four separate facilities for each of these regions. For each region, a regional financial institution will act as a “Host Bank” to implement and deploy the ARCAFIM financing in selected countries.

Outcomes

The ARCAFIM project delivery team, led by IFAD, will conduct the full design and structuring of the programme, as well as the funding proposals for financing partners. Specific objectives for the preparation activities co-financed by IFAD and NDF are the following: (i) Completed design, structuring and launch of ARCAFIM. (ii) Strengthened capacity of Host Banks to implement the ARCAFIM programme operations. (iii) Completed GCF Full Funding Proposal, including the main document and all required appendices, and financing proposals to other co-financiers.

Financing

NDF provided a EUR 500,000 Booster Grant.

NDF Contact

Program Manager, Isabel Leroux (Isabel.leroux@ndf.int)