1. Pakistan, being one of the most vulnerable countries in the world to the climate risk, has been witnessing severe climate related shocks for the last 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 and has affected the growth of microfinance sector.
   
   
2. To enhance the resilience of the Microfinance Providers (MFPs) and their agri clients against floods, the Federal Government has established a Climate Risk Fund I (CRF-I). The Fund essentially aims at promoting climate resilient farming and providing liquidity support to the small farmers affected by floods. The State Bank of Pakistan will manage this Fund under a Trust created by the Federal Government for this purpose.
   
   
3. The CRF-I will provide financing to the eligible MFPs under two facilities:
   
   a. Innovative Agriculture Liquidity (IAL) Facility
   b. Contingent Liquidity Facility (CLF)
   
   
4. The IAL facility will provide financing to the MFPs to pilot agriculture loans bundled with agri-tech services for their borrowers. This will help the borrowers to adopt climate resilient crops and cropping techniques and increase their productivity and resilience against climate shocks.
   
   
5. The CLF will provide financing to MFPs following a flooding event for onward lending to their borrowers affected by floods. This will help MFPs’ borrowers to continue their income generating activities post floods and gradually repay their loans. It will also help MFPs to preserve their asset quality and maintain operational continuity during climate-related disruptions. Under CLF, eligible MFPs affected by floods will avail liquidity to restructure and top up their existing loans to the affected borrowers, and/or give new loans. The detailed Rules for CRF-I, and the Policy and Procedures for the CRF-I Environmental and Social Management Systems (ESMS) are enclosed as Annexure-1 and Annexure-2 respectively.
   
   
6. The MFPs are encouraged to apply for allocation of limit under CRF-I as per the CRF-I Rules. The duly completed application along with annotated supporting documents must be submitted not later than September 30, 2025 either by email at [email protected] or by post to the following address:

   CRF-I Secretariat,
   Programs Management Division (PMD),
   Agriculture Credit & Financial Inclusion Department,
   5th Floor, State Bank of Pakistan, Karachi.
   Phone: 021-3311-5567, 021-3311-5587

Enclosed:

Annexure 1: Rules for the Climate Risk Fund I (CRF-I)
Annexure 2: CRF-I Environmental and Social Management System Policy and Procedures


Yours truly,