The State Bank of Pakistan (SBP) has announced the establishment of the Climate Risk Fund-I (CRF-I) under the World Bank–funded Resilience, Access, and Mobilization (RAM) Project. The fund is designed to strengthen the capacity of microfinance providers (MFPs) and their agricultural borrowers in coping with recurring climate-related shocks, particularly floods.
A circular issued by SBP’s Agriculture Credit and Financial Inclusion Department (ACFID) confirmed that the fund will be managed under a trust established by the federal government. The initiative underscores Pakistan’s pressing need to build resilience in the agriculture sector, which remains highly vulnerable to climate change.
Pakistan has consistently ranked among the most climate-vulnerable countries in the world, facing frequent and severe weather-related disruptions. The 2022 floods served as a reminder of the destructive potential of such events, devastating agricultural lands, displacing communities, and leaving small and subsistence farmers struggling to recover. These shocks not only jeopardize livelihoods but also place significant strain on microfinance institutions, increasing loan delinquencies and liquidity pressures.
To address these challenges, the CRF-I has been structured around two facilities: the Innovative Agriculture Liquidity (IAL) Facility and the Contingent Liquidity Facility (CLF).
The IAL Facility will enable MFPs to offer agricultural loans bundled with agri-tech solutions to their clients. Through this, farmers can adopt climate-resilient crops and modern farming practices, improving both productivity and adaptability to environmental challenges. By linking financing with technology-driven agricultural services, the IAL Facility aims to create a long-term shift toward sustainable farming.
The CLF, meanwhile, will act as a rapid-response tool following flood events. It will provide liquidity to MFPs for onward lending to flood-affected borrowers. This mechanism is intended to allow farmers to resume income-generating activities while gradually repaying their obligations. For microfinance providers, the CLF offers a way to protect asset quality and maintain operations despite climate-related disruptions.
Under this framework, MFPs will be able to restructure or top up existing loans and issue new financing to communities most impacted by floods. SBP has emphasized that these measures are designed not just to provide immediate relief but also to safeguard the long-term stability of Pakistan’s microfinance ecosystem.
Detailed rules for CRF-I, along with the Environmental and Social Management Systems (ESMS) guidelines, have been issued as annexures. Eligible MFPs have been encouraged to apply for allocation of limits under the fund by submitting completed applications and supporting documentation by September 30, 2025. Submissions can be made via email to PMD.Reporting@sbp.org.pk or sent directly to the CRF-I Secretariat at SBP’s Karachi headquarters.
By combining liquidity support with climate-smart agricultural practices, the Climate Risk Fund is expected to become a cornerstone in Pakistan’s ongoing efforts to protect vulnerable farmers, stabilize rural lending, and ensure continuity of economic activity despite environmental challenges.
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