According to the WB, the development objective is to promote access to sustainable finance for agricultural investments for the transformation of the agri-food production system of the project beneficiaries

The proposed project is a five-year financial intermediary investment project with a total cost estimated at US$239 million. The proposed project would be financed with a US$100 million IBRD loan, US$17 million financing from the Canadian Clean Energy and Forest Climate Facility (CCEFCF), US$ 8.0 million from the Food System 2030 Umbrella Program (FS2030), US$15 million counterpart funding from FINAGRO, and, at least, US$99 million from private financing. FINAGRO will be the borrower and implementing entity. The project will improve productivity, strengthen the capacity to adapt to and mitigate climate change conditions and reduce greenhouse gas emissions, also leveraging the Bank's global knowledge and experience specialized in strengthening agrifinancial institutional capacity. The project consists of three components: (1) Strengthening financial sector institutional capacity, (2) Access to sustainable finance for agrifood system, and (3) Project management. Component 1. Strengthening agrifinancial sector's institutional capacity and repurposing agriculture support policies (US$ 2 million FINAGRO; and US$ 8.0 million FS2030). Under this component, the project will finance the provision of technical assistance, capacity building, training, and institutional strengthening of FINAGRO, FINAGRO's Agricultural Partial Credit Guarantee - FAG, and Participating Financial Institutions (PFIs) to enable small low-income farmers, and medium-scale farmers in Colombia to access sustainable financing to implement CSA and agri-businesses. This component will also help institutions linked to the agricultural sector transform the agrifood system by redirecting resources from harmful and distorting practices to more sustainable ones through the repurposing of agrifinance support programs. Subcomponent 1.1. Enhancing the institutional capacity of the agrifinancial sector (US$ 2 million FINAGRO). This subcomponent would finance, inter alia: (a) provision of technical assistance to improve FINAGRO's capacity to structure climate-smart credit programs; (b) develop and implement a data management system which collects and monitors beneficiaries' personal and subloan data for reporting purposes; (c) strengthen FINAGRO's recently created Sustainable Finance Unit; (d) improve the capacity to integrate climate change risks, costs, and opportunities into FINAGRO's business model; (e) implement capacity building programs aimed at PFIs, including the development and/or improvement of their Environmental and Social Management Systems; and (f) conduct knowledge exchanges on strategies and operational approaches to agricultural finance.Subcomponent 1.2. Repurposing agriculture support policies (US$ 8.0 million FS2030). This subcomponent will support MADR with, inter alia, (a) conducting of a comprehensive review of the existing CSA technologies available, and develop technical materials and technical agriculture delivery mechanisms for the identified CSA technologies; (b) studying the existing financing support programs to the agriculture sector, identify areas of improvement and propose policy changes. This activity also involves designing and implementing repurposing pilots to reorient public support towards CSA technology adoption, providing technical assistance for the modernization of policy, legal, regulatory, and institutional frameworks governing the agriculture sector to mainstream climate change and food security and nutrition targets, and developing and implementing a communication strategy to inform the public and private sector about the drawbacks of these publicly supported programs and the benefits of reform. Furthermore, this subcomponent will help FINAGRO finance, inter alia, (c) the design and implementation of sustainable financing products to promote the adoption of CSA technologies: this activity also involves assessing options and covering related costs to ensure the integrity and credibility of climate change mitigation efforts (i.e. certification bodies, government agencies, international organizations, others), particularly in the context of carbon markets. Component 2. Access to sustainable finance for agrifood systems (US$99 million IBRD; US$17 million CCEFCF; US$12 million FINAGRO; US$99 million private financing). This component will finance the provision of lines of credit and partial credit guarantees to eligible PFIs, which in turn will provide subloans for climate-smart investments to final borrowers in the agricultural sector. These subloans will cover final beneficiaries' investment needs, especially those investments requiring long-term to be repaid. By way of example, FINAGRO will classify subloans that align with CSA eligibility criteria into four credit types: (a) On-farm irrigation technologies and practices to improve water use efficiency; (b) Clean energy and energy efficiency; (c) Technology and machinery to improve nutrient use efficiency, and (d) Sustainable agricultural systems and carbon-smart technology. The total amount of the IBRD loan will be allocated to finance CSA investments. Moreover, 50 percent of the total number of subloans disbursed under the project will support women farmers. Subcomponent 2.1. Sustainable line of credit (US$99 million IBRD; US$17 million CCEFCF; US$12 million FINAGRO; US$37 million private financial intermediaries; and US$18 million final borrower). Under this component, the Project will support FINAGRO in promoting access to sustainable financing for agricultural farmers to facilitate the transformation of agrifood systems through CSA investments. Under this subcomponent, the Project will channel subloans with longer maturities to eligible farmers and Integradores. Longer maturities of subloans are critical for capital investments by offering borrowers stability and flexibility. This enables them to invest towards technology adoption, fixed asset acquisition, and infrastructure development that enhances resilience and adaptation to climate change or contributes to reducing greenhouse gas emissions in agrifood production systems. By aligning the duration of the subloan with the lifecycle of the capital project, longer-term financing minimizes the risks associated with refinancing or repayment issues, ensuring a more secure financial environment for all parties involved.Subcomponent 2.2. Partial credit guarantee for long-term sustainable subloans (Total cost US$40 million private financial intermediaries; US$ 4 million final borrowers). Under this subcomponent, the Agricultural Partial Credit Guarantee, financed by the MADR and managed by FINAGRO, will help private PFIs mitigate the credit risk of final borrowers by providing partial credit guarantees for subloans disbursed following the CSA eligibility criteria of the Project. Under this subcomponent, the FAG will use their own funds to encourage long-term financing offered by private commercial PFIs to farmers who are interested in adopting CSA technologies to grow their businesses but whose lack of collateral limits their capacity to get access to finance from the formal financial system. In this sense, the FAG seeks to improve conditions for longer-term financing offered by PFIs, while sharing with the PFIs the risks that might affect the repayment of subloans in the event of a default by the borrower. This subcomponent will crowd-in at least US$40 million from private commercial PFIs in subloans backed with FINAGRO's Agricultural Partial Credit Guarantee to finance CSA investments following the eligible criteria of this project in addition to the volume of subloans disbursed under subcomponent 2.1. The eligibility requirements for PFIs and the exclusive use of the FAG for loans in this subcomponent will align with those of subcomponent 2.1.Component 3. Project Management (US$1 million IBRD; US$1 million FINAGRO). Under this component, FINAGRO, as a borrower and implementing entity, will form a Project Coordination Team (PCT). The PCT, supported

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