New $305mln Program to Build Ethiopian Farmers’ Resilience to Climate Change

ADDIS ABABA – Ethiopia and the UN’s International Fund for Agricultural Development (IFAD) have launched today a new 305.7 million US dollars program to help the most vulnerable farmers increase their resilience to climate change.

The third phase of the Rural Financial Intermediation Program or RUFIP III is beginning against the backdrop of the global impacts of the COVID-19 pandemic and climate change.

Implemented by the Development Bank of Ethiopia (DBE), the program will help farmers to access financial services, raise and diversify their incomes, improve nutrition and build their resilience in rural areas threatened by climate change, said IFAD.

The virtual launch involved project participants, government officials, UN and IFAD staff, including Solomon Desta, Vice Governor of the National Bank of Ethiopia (NBE), Yohannes Ayalew, President of DBE, Catherine Sozi, UN Resident Coordinator to Ethiopia and Ulaç Demirag, IFAD Country Director for Ethiopia.

The funding includes a $35.1 million grant and a $4.9 million loan from IFAD, with significant co-financing from international development partners and from national financial institutions.

Government’s contribution is $51.9 million and $0.9million from the beneficiaries themselves, according to the UN agency.

‘Financial inclusion’ 

Ethiopia’s agriculture sector, which employs 80 percent of the population, continues to suffer from frequent droughts aggravated by climate change.

In 2017, insufficient rainfall during the rainy season led to catastrophic crop and livestock losses and left an estimated 8.5 million people in need of humanitarian assistance.

”RUFIP I and II made major contributions, not just in including 5 million customers in microfinance institutions, but also in improving regulatory capacities in microfinance, banking and lease finance supervision,” said Solomon Desta, Vice Governor of NBE.

”RUFIP showed that microfinance is a better strategy for financial inclusion of the vulnerable poor  – by comparison there are 5 million microfinance institution borrowers as against only 0.3 million in banks.”

The new program will build on the lessons and experiences of the first two phases of the program, the major backer of the RUFIP said, adding that it will scale up the delivery of rural financial services tailored to the needs of the most vulnerable smallholder farmers, particularly women and young people.

Through the project, officials said rural finance institutions will be able to deliver an expanded range of financial products and services to a large number of rural poor people.

It will also support the uptake of these products by rural savings and credit cooperatives and microfinance institutions through financial literacy training, in addition to developing insurance products through rural finance institutions to allow smallholder farmers to mitigate the risks related to climate change.

“RUFIP III is really about people — it is not to simply make credit available to the rural population, to strengthen the microfinance sector in Ethiopia and to promote agro-industrialization, but to bring 13.5 million vulnerable rural households on a sustainable path to prosperity,” said Ulaç Demirag, IFAD Country Director.

Since 1980, IFAD has invested $795.5 million in 20 rural development programs and projects in Ethiopia worth a total of $2.1 billion. These have directly benefited around 12 million rural households.

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