Pakistan Launches $125 Million Climate Risk Fund to Support Farmers
The federal government has set up the Climate Risk Fund I (CRF-I) under the World Bank–supported Resilient and Accessible Microfinance (RAM) Project, with financing of $125 million. The initiative is aimed at promoting climate-resilient farming and ensuring liquidity support for small farmers impacted by floods.
The State Bank of Pakistan (SBP) will manage the fund under a trust established by the federal government. The main goal is to strengthen the resilience of microfinance providers (MFPs) and their clients in the agriculture sector against flood-related risks.
Why This Fund Matters
Pakistan is among the world’s most climate-vulnerable countries. Recent disasters, especially the 2022 floods, highlighted the severe challenges faced by the agriculture sector, particularly subsistence and landless farmers. These floods not only destroyed livelihoods but also led to loan repayment issues, liquidity shortages for microfinance institutions, and slowed sectoral growth.
Objectives of CRF-I
The fund has been designed to:
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Provide liquidity support after flood events through a contingent facility.
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Safeguard the financial health of MFPs by reducing flood-related loan defaults.
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Strengthen the resilience of small farmers in disaster-hit regions.
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Support adoption of climate-smart farming practices through innovative agricultural loans.
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Explore options for risk transfer via international reinsurance to reduce the long-term economic burden of floods.
Facilities Under CRF-I
The fund will operate through two financing facilities for MFPs:
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Innovative Agriculture Liquidity (IAL) Facility
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Provides financing for agricultural loans bundled with agri-tech services.
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Helps farmers shift to climate-resilient crops and techniques to improve productivity and adapt to changing weather patterns.
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Contingent Liquidity Facility (CLF)
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Activated after a flooding event.
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Enables MFPs to continue lending to flood-affected farmers.
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Supports borrowers in restructuring or topping up existing loans to sustain income-generating activities during recovery.
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Looking Ahead
The Climate Risk Fund I is expected to strengthen financial resilience in Pakistan’s agriculture sector, protect microfinance institutions from climate shocks, and provide farmers with better tools to adapt to a changing environment.
