Small farmers and microfinance sector: Pakistan launches Climate Risk Fund-I
KARACHI: Pakistan has launched the Climate Risk Fund-I (CRF-I) under the World Bank–funded Resilience and Adaptation Mainstreaming (RAM) Project, to strengthen the country’s most vulnerable farming communities and microfinance institutions against climate-induced shocks, particularly floods.
In March this year, the World Bank approved USD102 million in financing for Pakistan under the Resilient and Accessible Microfinance (RAM) Project, which aims to enhance access to micro credit and support the resilience of the microfinance sector and its borrowers, particularly in the face of climate-related shocks.
According to the State Bank of Pakistan (SBP) Pakistan is among the world’s most climate-vulnerable countries and has faced repeated climate disasters in recent years, with the 2022 floods serving as a grim reminder of the risks.
World Bank approves $102mn financing for Pakistan’s RAM Project
The agriculture sector, particularly the small, subsistence and landless farmers, generally served by the microfinance sector, is the most vulnerable and worst hit segments.
Climate change has also significantly increased the risk of loan delinquencies and liquidity shortages in microfinance banks and institutions, and has affected the growth of microfinance sector. Therefore, to enhance the resilience of the Microfinance Providers (MFPs) and their agri clients against floods, the federal government has established the Climate Risk Fund I (CRF-I).
The Fund essentially aims at promoting climate resilient farming and providing liquidity support to the small farmers affected by floods. The SBP will manage this Fund under a Trust created by the federal government for this purpose.
The CRF-I will provide financing to the eligible MFPs under two facilities, first Innovative Agriculture Liquidity (IAL) Facility and secondly Contingent Liquidity Facility (CLF).
The IAL facility will provide financing to the MFPs to pilot agriculture loans bundled with agri-tech services for their borrowers to adopt climate resilient crops and cropping techniques and increase their productivity and resilience against climate shocks.
In addition, the CLF will provide financing to MFPs following a flooding event for onward lending to their borrowers affected by floods.
This will help MFPs’ borrowers to continue their income generating activities post floods and gradually repay their loans, besides to preserve their asset quality and maintain operational continuity during climate-related disruptions.
Under CLF, eligible MFPs affected by floods will avail liquidity to restructure and top up their existing loans to the affected borrowers, and/ or give new loans.
SBP has issued detailed Rules for CRF-I along with the Policy and Procedures for Environmental and Social Management Systems (ESMS).
Microfinance providers have been invited to apply for an allocation under CRF-I by submitting applications with supporting documents no later than September 30, 2025 to the CRF-I Secretariat, Programs Management Division (PMD), and Agricultural Credit & Financial Inclusion Department, State Bank of Pakistan.
Copyright Business Recorder, 2025