Advising Tanzania Agricultural Development Bank (TADB) on climate risk management

THE BACKGROUND

Tanzania has plans to both increase its resilience against climate change and reduce its GHG emissions. Climate change is projected to cause a steady increase of average temperatures, less rain in dry seasons and more rain in wet seasons, causing increasingly unfavourable conditions for the agricultural sector. Farmers will face more severe and frequent droughts, floods (which may entail landslides in mountainous areas) and weather variabilities. Lack of climate-smart management practices and adaptation measures (such as choice of drought-resilient crops or irrigation systems, respectively) render the Tanzanian agricultural sector highly vulnerable to climate change. However, targeted interventions can enhance farmers’ adaptive capacities while also leading to a reduction of GHG emissions from the agricultural sector.

In line with global developments, the Bank of Tanzania (Tanzania’s central bank) has issued guidelines on climate risk management in December 2022. These guidelines require Tanzanian banks to implement climate-related policies and systems, including provisions on climate governance and internal control, climate risk management, scenario analysis, stress testing, and climate reporting.

THE PROJECT

FINANCE FOR IMPACT advised Tanzania Agricultural Development Bank (TADB) in assessing the climate risks in its portfolio, and to develop tools, methodologies and capacity to climate proof future (on-)lending in selected sub-sectors / value chains. Specific objectives included:

• Identify climate risks in TADB’s portfolio
• Identify adaptation measures that TADB’s clients can take
• Mainstream climate risk assessment into standard management processes
• Build the bank’s capacity for climate risk management

THE RESULTS

This information is confidential.