African Guarantee Fund launches $5bn initiative for renewable energy access across the continent
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The AGF has been pivotal in bridging the financing gap faced by green SMEs by implementing the Green Guarantee Facility, aided by the Nordic Development Fund and the Investment Fund for Developing Countries. Picture: Supplied
The African Guarantee Fund (AGF) has launched its Mission 300 Local Currency Guarantee Facility, an initiative aims to mobilise $5 billion to support energy access projects across Africa.
This initiative will facilitate financing for small and medium-sized enterprises (SMEs) within the Distributed Renewable Energy (DRE) sector through strategic partnerships, innovative financing mechanisms, and capacity-building efforts, heralding a new era of energy access across the continent.
The unveiling of this facility is part of a broader, ambitious initiative led by the African Development Bank Group (AfDB) and the World Bank Group, aiming to provide electricity to 300 million Africans by 2030.
Currently, Africa grapples with an alarming energy access challenge, with approximately 600 million people lacking electricity as of 2023, necessitating an estimated annual investment of nearly $25bn to achieve universal energy access by the same year.
“The Mission 300 Local Currency Guarantee Facility will encourage collaboration with African governments whilst leveraging concessional financing from the African Development Bank, the World Bank Group, and other development partners to scale the involvement of local banks in financing Distributed Renewable Energy solutions,” said Wale Shonibare, director for energy financial solutions, policy, and regulations at the AfDB.
The AGF has been pivotal in bridging the financing gap faced by green SMEs by implementing the Green Guarantee Facility, aided by the Nordic Development Fund and the Investment Fund for Developing Countries.
This facility has successfully mobilised financing for green, clean, and renewable energy projects, positioning AGF as a leader in driving sustainable development across Africa.
By lowering the exposure of financial institutions to defaults, the Green Guarantee Facility fosters confidence in lending to distributed renewable energy SMEs, while facilitating electrification efforts in underserved rural and peri-urban communities.
In addressing critical barriers such as high collateral requirements and currency mismatches, AGF has effectively de-risked SME lending and mobilised significant private sector capital for Africa’s energy transition.
“AGF’s leadership in driving financial innovation for SMEs aligns seamlessly with the goals of Mission 300. By addressing financing gaps and fostering public-private partnerships, AGF plays a crucial role in driving inclusive energy solutions, accelerating the energy transition, and reducing carbon emissions across the continent,” said Jules Ngankam, AGF Group CEO.
“We have successfully implemented the Green Guarantee, which has facilitated progress toward national commitments under the Africa Energy Declaration, the African Union’s Vision 2063, and the global Sustainable Development Goals, fostering inclusive growth and climate resilience.”
A recent illustration of AGF’s impact in the sector is its involvement in a credit guarantee syndication for a 40MW solar plant in Madagascar. This landmark project not only illustrated the viability of local currency financing for renewable energy ventures in the country, but also enhanced power sector resilience by diversifying away from thermal power.
Benefiting approximately 285 000 people, the initiative supports UN Sustainable Development Goals by providing affordable and clean energy while also aiming to combat climate change by reducing emissions by 34 000 tons of CO2.
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