Govt Launches $125M Climate Risk Fund to Support Small Farmers

Govt Launches Climate Risk Fund to Support Small Farmers

The federal government has created a new Climate Risk Fund (CRF-I) worth $125 million under the World Bank’s Resilient and Accessible Microfinance (RAM) Project. This fund is designed to protect small farmers from flood-related losses and promote climate-friendly farming practices.

Managed by State Bank of Pakistan

The fund will be managed by the State Bank of Pakistan (SBP) through a trust. Its main goal is to provide financial support to microfinance providers (MFPs) so they can continue lending to small farmers even after floods.

Why This Fund is Important

Pakistan is among the most climate-vulnerable countries in the world. Farmers, especially those with small landholdings, face the greatest risks. The 2022 floods destroyed crops, disrupted livelihoods, and created a financial crisis for microfinance institutions.

The new fund aims to solve these issues by offering both liquidity support and resilient farming options.

Objectives of the Fund

The Climate Risk Fund will:

Provide emergency financing in flood-affected areas.

Protect the financial stability of microfinance institutions.

Help farmers continue their income activities after floods.

Support climate-smart farming techniques for better productivity.

Transfer some economic risks of floods through international reinsurance.

Facilities for Microfinance Providers

The fund offers two main facilities:

1. Innovative Agriculture Liquidity (IAL) Facility

This facility will finance microfinance institutions to offer climate-smart agricultural loans. These loans will be bundled with agri-tech services to help farmers grow climate-resilient crops.

2. Contingent Liquidity Facility (CLF)

The CLF will provide financing after a flood event. Microfinance providers will be able to restructure existing loans, issue new loans, or top-up funds for affected farmers. This will allow borrowers to recover, continue their activities, and repay loans gradually.

A Step Towards Climate-Resilient Agriculture

This initiative is expected to protect small farmers, stabilize the microfinance sector, and encourage the adoption of modern farming techniques. It is also a step forward in reducing Pakistan’s economic vulnerability to climate disasters.