The Co-operative Bank of Kenya (Co-op Bank) has signed a loan portfolio guarantee agreement with the African Guarantee Fund (AGF) for Small and Medium-sized Enterprises (SMEs). The goal of this agreement is to boost financing for green energy projects in the country.
Financial Support for Emerging Green Energy Projects
Under this Kes. 750 million deal, Co-op Bank will be able to support more emerging green energy projects, reflecting the rising demand for solar energy in Kenya. Solar power has become significantly more affordable, with costs dropping by 80% since 2010, and between 2018 and 2019 alone, solar prices fell by 13%. According to Kenya’s 2019 Population and Housing Census, 19.3% of Kenyan homes are now using solar power.
Overcoming Challenges in Solar Energy Financing
Jacquelyne Waithaka, the bank’s director of corporate and institutional banking, highlighted one of the key challenges in financing solar energy: the issue of collateral. She explained that solar panels and inverters are not preferred as security for loans because they cannot be easily liquidated in case of default. The partnership with AGF, however, has created an instrument to overcome this hurdle, allowing the bank to finance solar energy projects more effectively.
Waithaka also emphasized the positive impact this partnership will have on Micro, Small, and Medium Enterprises (MSMEs). Energy costs are a major expense for many MSMEs, especially those involved in manufacturing, light industry, and agro-processing. By reducing these costs through solar energy, MSMEs will become more competitive, while the environment will benefit from reduced carbon emissions. As solar technology prices continue to fall and AGF develops more products, the hope is that more Kenyans will be able to afford renewable energy solutions.
AGF’s Role in Supporting Sustainable Financing
Franck Adjagba, AGF’s Group director of business development, pointed out the urgent need for risk mitigation instruments for Kenyan banks to support lending to SMEs. He also stressed the importance of balancing economic growth with environmental sustainability. The partnership with Co-op Bank reflects AGF’s commitment to increasing financing for businesses in the green sector, contributing to a more sustainable future.
