Extreme weather in Northern Kenya shows no signs of slowing down. Flooding and heavy rains that experts say are only seen once every 100 years are currently testing the resilience of pastoralist communities in the area. The floods trail five failed rainy seasons and severe droughts between 2020 and 2023. Further, experts predict a likelihood of resumed drought conditions in the region in 2025. The Impact for Northern Kenya Fund is an impact investing fund that provides catalytic financing to these underserved communities. On April 22, the Fund launched its new climate finance window, which earmarks $6 million (810 million KSH) for climate financing.
This dedicated pool of $6 million will provide capital to those who are driving climate change adaptation and mitigation in the area. The Fund is managed by AV Ventures, an impact investing subsidiary of ACDI/VOCA, and USAID Kuza. Financing for the Fund comes entirely from USAID Kenya and East Africa in collaboration with USAID Kuza.
So, how exactly will the capital be used? Financial institutions and small- and medium-sized enterprises in certain climate sectors will be eligible to receive loans to support their growing businesses.
The Fund operates with a clear understanding that we cannot separate the resilience of people from the resilience of the planet. With the climate finance window, we look forward to financing solutions that reinforce each side — from microloans for producers of clean cooking briquettes to quasi-equity financing for large-scale solar farms.
Geoffrey Chalmers, Managing Directo, AV Ventures
Adapting To A Challenging Climate Landscape
To date, the Fund has disbursed hundreds of loans to enterprises negatively impacted by drought, floods, and other natural disasters in Northern Kenya. For example, a previous loan provided to Solargen, a company providing solar power generation systems for rural communities, supported its pay-as-you-go model. Additionally, the Fund has financed financial institutions that on-lent to road construction companies, supporting the development of gabions to prevent erosion and landslides.
Through loans like these, Northern Kenyan enterprises can continue operating, ensure better food security, and create employment opportunities, even in the face of climate change. With the Fund’s new climate finance window, USAID Kuza is institutionalizing its climate finance strategy with dedicated capital, technical assistance, and resources.
Digitization To Improve Collection Of Climate Metrics
USAID Kuza is also developing a proprietary data digitization tool for the Fund’s clients. The tool will allow for field data entry and will use enterprise, location, and loan statistics to provide estimates of hard-to-capture data points, such as carbon emissions reduction, energy access, and financial inclusion. This will ensure that investments are aligned with climate objectives and guide future decision-making by investors and donors.
This article was initially published by ACDI/VOCA.
