Farmers and Agri-SMEs in Kenya will now have access to a loan facility that incorporates agricultural technologies and climate-smart agriculture through ADAPTA, the first climate adaptation credit facility in Africa that is being funded by the Bill and Melinda Gates Foundation.
ADAPTA is also partnering with USAID’s Kenya Investment Mechanism to mobilize local financial advisors and strengthen their sustainable finance expertise, in the project’s first phase backed by US$1.5 million (Approx. KES 167 million).
German Vegarra, one of the ADAPTA principals spoke with optimism during their launch saying they hope the agriculture risk management framework they are providing farmers can “transform sustainable finance the same way credit scores and credit ratings transformed consumer and corporate finance.”
“Unless we mobilize large pools of capital for climate adaptation, we will not reach the small producers and Agri-SMEs that are on the front lines of climate change and will be hit the hardest. We are thrilled that the Gates Foundation is supporting ADAPTA’s vision.” Vegarra added.
Although the agriculture sector contributes as much as 34% to the GDP of Kenya and employs the majority of the rural population, less than 5% of lending is available for them. Climate change as shown through increased temperature, drought as well as pests and diseases, is predicted to have drastic negative effects on production.
For example, over half a million small-scale farmers in Kenya depend on tea for their livelihoods, and they will see a decrease of as huge as 26% in optimal conditions for growing tea by 2030.
ADAPTA is developing and testing a Climate-Smart Module (CSM) that will leverage satellite-derived and other data sets on vegetation, soils, hydrology, climate, energy, and water efficiency, including social and gender dimensions, to assess risk and identify adaptation options. They will also work with primary producers and Agri-SMEs to assess their climate change risks and resilience and embed an adaptation plan into their growth strategies.
In their plan, they will also use climate scoring algorithms to transform how banks and investors assess agricultural risk to unlock financing for farmers and Agri-SMEs. These innovations will be developed in partnership with the Alliance of Bioversity International and CGIAR, the largest global network on agriculture research.
“We are convinced strong partnerships between science organizations and private investors can play a catalytic role in transforming the sustainable finance ecosystem in the agriculture sector,” the Director-General of the Alliance in a press release.
Bottlenecks like the lack of robust data on risks and the transaction costs associated with due diligence, technical assistance, and monitoring have reduced appetite for spending into agriculture, and they hope to address all the barriers proactively.
ADAPTA plans a global Phase II in 2023 focusing on Africa, Asia, and Latin America.