Advancing climate-smart financial solutions for smallholder farmers: Lessons from the CGIAR Climate Resilience Initiative

The CGIAR Research Initiative on Climate Resilience (ClimBeR) has developed and implemented a suite of innovative instruments aimed at transforming the climate adaptation capacity of smallholder farmers. Smallholder farmers in low-and middle-income countries face climate-related risks that increase their income volatility and compromise their well-being. This brief examines the potential of these bundled financial solutions in enhancing smallholder farmers' resilience to climate risks and documents ClimBeR's experience in implementing and scaling these instruments.

The financial innovations implemented under the ClimBeR initiative demonstrate significant potential to address critical barriers to financial inclusion for smallholder farmers and enhance their resilience to climate risks. The three innovations, Risk Contingent Credit (RCC), Climate-Credit Scoring, and Area-Based Yield Index Insurance (ARBY) highlight the transformative power of bundling credit, insurance, and climate-informed decision-making tools to create inclusive and scalable financial solutions. However, the social distribution of benefits underscores the importance of ensuring equity in implementation. Marginalized groups especially younger women, youth, and farmers with limited education continue to face systemic barriers to accessing financial tools, highlighting the need for inclusive design, gender-sensitive outreach, and capacity-building programs. As these financial tools continue to evolve, it is essential to address both demand-side challenges, such as limited financial literacy and trust, and supply-side constraints, including private sector risk appetite and digital readiness.