Fighting Hunger and Climate Change, UN Fund Seeks More Private Sector Partnerships

Photo by Clay LeConey

As global leaders gathered this week at the World Economic Forum in Davos, Switzerland to discuss solutions to urgent global challenges, the United Nations’ International Fund for Agricultural Development (IFAD) announced efforts to increase private sector investment in rural and agricultural development. This comes as IFAD formally joins the Development Finance Institutions (DFI) Enhanced Blended Concessional Finance working group.

The DFI working group serves as a platform for development banks and agencies to collaborate on addressing worldwide issues. It utilizes blended finance in a rigorous, transparent way to encourage investment for sustainable development. IFAD’s acceptance into the group and adherence to the DFI Principles for blended concessional finance aligns IFAD with all major development finance institutions providing subsidized blended financing.

“We must accelerate our work with the private sector if we truly aim to end hunger and poverty and address climate change before it is too late,” said IFAD President Alvaro Lario in Davos. “Private sector investments, expertise, market access and available technologies are absolutely vital to transform rural economies. They are a lifeline to small-scale food producers on the frontlines of the climate and food crises.”

Strategic use of blended finance is emerging as a cornerstone of IFAD’s approach. Blending subsidized development funds with private capital can mitigate risks and catalyze investments that might not happen otherwise.

Last month, IFAD member states endorsed a plan to scale up private sector investments through IFAD’s Private Sector Financing Programme (PSFP) during 2025-2027. The program engages private partners like farmers’ cooperatives, small businesses, agribusinesses and rural financial institutions.

Since 2021, the PSFP has been largely funded by earmarked donor contributions alongside $25 million in seed funding from IFAD. Now IFAD intends to significantly increase its own financing to over $100 million for private sector operations under the PSFP during 2025-2027. While donor contributions will remain important, especially for blending, this shift leverages IFAD’s financial capacity to help catalyze up to $500 million in private investment for smallholder farmers and rural households.

The PSFP provides funding through debt instruments like loans and credit lines, risk sharing facilities and guarantees, and equity investments. Its main goals are job creation, economic inclusion of youth and women, and promoting climate resilience.

A new $2.5 million PSFP loan was just approved for Hamkorbank, a leading Uzbek commercial bank, to support microloans for dairy and produce farmers. Since its 2021 launch, the PSFP has financed $33 million for eight projects, attracting $155 million in co-financing and reaching up to 500,000 people.

Using the PSFP, IFAD is also developing large investment platforms like the $200 million Africa Rural Climate Adaptation Finance Mechanism (ARCAFIM) launched in December at the COP28 climate summit. ARCAFIM uses blended finance to incentivize private climate adaptation investments for smallholder farmers, blending donor funds from organizations like the Green Climate Fund with commercial financing from Equity Bank. It is available in Kenya, Rwanda, Tanzania and Uganda.

With over 3 billion people unable to afford healthy diets and 1 in 5 children stunted, IFAD is pursuing innovative finance solutions to support climate-resilient rural development and address growing hunger and inequality accelerated by climate change and global food crises.

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