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 with the aim of boosting finance for green projects.
The bank says the Kes.750m deal will enable it to support more emerging green energy projects.
The agreement reflects an increased demand for solar energy in Kenya. Solar costs have fallen by 80% since 2010.
Between 2018 and 2019 the price of solar power fell by 13%. The country’s 2019 Population and Housing Census revealed that 19.3% of Kenyan homes used solar power.
The bank’s director of corporate and institutional banking Jacquelyne Waithaka said: “The challenge that banks and other financiers face in the financing of solar energy regards the kind of securities that customers offer as collateral for credit.
Solar panels and inverters, for instance, are not a preferred security because they cannot be easily liquidated in case of loan default.
Co-op Bank’s partnership with AGF has created an instrument that overcomes this challenge, thereby giving the bank considerable ability to finance solar energy programs effectively.
“Energy costs remain one of heaviest input costs for many MSMEs. This partnership is expected to have large positive impact on MSMEs involved in manufacturing, light industry and agro-processing by reducing the cost of doing business thereby making them more competitive.
For the environment, a successful uptake of the scheme will lead to the reduction in Carbon emissions.
It is also expected that as the prices of solar technologies continue to come down and AGF continues to develop other products, a greater number of Kenyans will afford renewable energy products and services.
AGF Group director of business development Franck Adjagba said: “Banks in Kenya are in dire need of risk mitigating instruments to support their lending activities to SMEs.
However, we should aim for economic growth without degrading the environment. Sustainability improves the quality of our lives, protects our ecosystem and preserves natural resources for future generations.
Our partnership with Co-op Bank today reflects our commitment to increase financing of businesses in the green sector.”