CLIMATE ADAPTATION

Africa's first climate adaptation credit facility launched in Kenya

ADAPTA plans to use climate scoring algorithms to transform how banks and investors assess agricultural risk.

In Summary

•The facility has a US$1.5 million funding from the Bill & Melinda Gates Foundation for Phase I in the country.

•In its statement on Monday, ADAPTA it will develop and test an innovative loan underwriting platform that incorporates agricultural technologies and climate-smart agriculture.  

A farmer goes in his maize plantation.
A farmer goes in his maize plantation.
Image: FILE

Africa's first climate adaptation credit facility for agriculture, ADAPTA, has launched in Kenya.

The facility has $1.5 million funding from the Bill & Melinda Gates Foundation for Phase I in the country.

In its statement on Monday, ADAPTA said it will develop and test an innovative loan underwriting platform that incorporates agricultural technologies and climate-smart agriculture. 

ADAPTA plans to 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 CIAT, part of the CGIAR, the largest global network on agriculture research.

Kenya's agricultural sector represents 34 per cent of GDP, employs 60 per cent of its rural population, and is responsible for 50+per cent of exports.

With less than five per cent of total lending going to the sector, the potential to apply and scale climate-smart agriculture technologies to enhance the climate resilience of agriculture value chains is limited.

A recent study predicts that optimal conditions for growing tea in Kenya will be reduced by 26 per cent by 2050 due to climate change.

Climate change is predicted to affect tea growing in Kenya through rising temperatures, droughts, frosts, shifting, and unpredictable weather patterns, as well as changes in pests and diseases threatening production. 

Over half a million small-scale farmers in Kenya depend on tea for their livelihoods. ADAPTA's climate-smart banking approach will be vital to financing climate adaptation in various agriculture value chains in Kenya, including the tea sector.

ADAPTA's Phase I focuses on developing and testing a Climate-Smart Module (CSM) and an agriculture risk management framework to address adaptation finance barriers proactively.

The CSM 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 within value chains.

ADAPTA is also partnering with USAID's Kenya Investment Mechanism to mobilize local financial advisors and strengthen their sustainable finance expertise, a service in great demand. 

ADAPTA's Principals, German Vegarra and Madleine Mwithiga, both based in Nairobi, bring deep knowledge in agribusiness finance and years of experience developing and launching innovative, multi-stakeholder initiatives in agribusiness and SME lending, risk management, sustainability, and blended finance.   

"We hope ADAPTA's CSM can transform sustainable finance the same way credit scores and credit ratings transformed consumer and corporate finance,” Vegarra said.

“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."

Juan Lucas Restrepo, the Director General of the Alliance said, “We are convinced strong partnerships between science organizations like the CGIAR and private investors can play a catalytic role in transforming the sustainable finance ecosystem in the agriculture sector."

"Science and innovation can help address some of the main bottlenecks currently reducing appetite for investing into agriculture, namely the lack of robust data on risks and the transaction costs associated with due diligence, technical assistance, and monitoring. We are very much looking forward to this cooperation with ADAPTA and the Gates Foundation," he added.