SBP establishes Climate Risk Fund under World Bank Project

September 16, 2025 (MLN): The State Bank of Pakistan (SBP) has established a Climate Risk Fund-I (CRF-I) under the World Bank-funded RAM Project to strengthen the resilience of Microfinance Providers (MFPs) and their agriculture clients against floods, according to a circular issued by the Agriculture Credit and Financial Inclusion Department (ACFID) to Presidents and CEOs of microfinance banks, non-bank microfinance companies, and non-bank finance companies.

Pakistan, being one of the most vulnerable countries in the world to climate risk, has been witnessing severe climate-related shocks for many years.

The agriculture sector, particularly the small, subsistence and landless farmers generally served by the microfinance sector, is the most vulnerable and worst-hit segment, as witnessed during the 2022 floods.

This has also significantly increased the risk of loan delinquencies and liquidity shortages in microfinance banks and institutions, affecting the overall growth of the sector.

To enhance resilience, the Federal Government has established the Climate Risk Fund-I, which aims at promoting climate-resilient farming and providing liquidity support to small farmers impacted by floods.The SBP will manage this Fund under a Trust set up by the Government.

The CRF-I will provide financing to eligible MFPs under two facilities: the Innovative Agriculture Liquidity (IAL) Facility and the Contingent Liquidity Facility (CLF).

The IAL facility will provide financing to MFPs to pilot agriculture loans bundled with agri-tech services for their borrowers. This is expected to help farmers adopt climate-resilient crops and cropping techniques while enhancing their productivity and resilience against climate shocks.

The CLF, on the other hand, will provide financing to MFPs following a flooding event for onward lending to borrowers affected by floods.

 It will allow borrowers to continue income-generating activities post floods and gradually repay their loans, while enabling MFPs to preserve asset quality and maintain operational continuity during climate-related disruptions.

Under the CLF, eligible MFPs affected by floods will avail liquidity to restructure and top up existing loans to affected borrowers, and/or issue new loans.

The detailed Rules for CRF-I, along with the Policy and Procedures for the CRF-I Environmental and Social Management Systems (ESMS), have been issued as annexures.

The SBP has encouraged MFPs to apply for allocation of limits under CRF-I as per the prescribed rules.

Completed applications, along with annotated supporting documents, must be submitted no later than September 30, 2025, either by email at PMD.Reporting@sbp.org.pk or by post to the CRF-I Secretariat, Programs Management Division, Agricultural Credit & Financial Inclusion Department, 10th Floor, State Bank of Pakistan, Karachi.

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