African Guarantee Fund signed a Loan Portfolio Guarantee agreement with Co-operative Bank of Kenya amounting to USD 7.5 million to increase financing of green transactions in Kenya. The guarantee facility will enable Co-operative Bank, on the one hand, to strengthen its commitment to financing Micro, Small and Medium-Sized Enterprises(MSMEs) and on the other hand, to promote emerging corporates in Kenya that are involved in green energy and solar installation projects.
AGF Group Director of Business Development Franck Adjagba reaffirmed AGF’s commitment in promoting a sustainable economic growth in the country. He 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-operative bank today reflects our commitment to increase financing of businesses in the green sector.”
According to figures released by the International Renewable Energy Agency, increased demand and technological advances have contributed to the significant decrease in solar photovoltaic (pv) systems costs over the years. Solar costs have fallen by over 80% since 2010 while the levelized cost of energy generated by large scale solar plants is under Kes 10/kwh, compared to about Kes 38/kwh ten years ago. The figures further indicate that between 2018 and 2019 alone, the price of solar power fell by 13%.
Commenting on these statistics, Co-operative bank’s Director, Corporate and Institutional Banking Jacquelyne Waithaka said, “The challenge banks and other financiers have had in respect to solar energy is that of securities offered as collateral for credit. Solar panels and inverters are not a preferred security because they are not easily resold in case of default. Co-operative Bank’s partnership with AGF has created an instrument that will give the bank the ability to finance solar energy programs effectively.”
Energy costs are some of the heaviest input costs in many MSMEs. This partnership is expected to have positive impact in Micro, Small and Medium enterprises 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 of Carbon dioxide emissions. It is also expected that as the prices of solar solutions come down and AGF continues to develop other products, a greater number of Kenyans will afford renewable energy products and services,” she added.
Through this partnership, Co-operative bank will be able to avail the following opportunities to its clients across the country: Upselling trade solutions; Counterparty onboarding opportunities; Trade Commission growth and Onboarding of new MSME package accounts.