Co-op Bank, African Guarantee Fund Partnership To Boost Green Financing

The Co-operative Bank of Kenya on 21st Sept. 2021 signed a loan portfolio guarantee agreement with the African Guarantee Fund (AGF) for small and Medium-sized enterprises amounting to Ksh750 million to increase financing of green transactions in Kenya.

The guarantee facility will enable Co-op Bank to strengthen its commitment to financing micro, small and medium-sized enterprises (MSMEs) and promote emerging corporates in Kenya that are involved in green energy and solar installation projects.

According to data from the International Renewable Energy Agency, increased demand and technological advances have contributed to a 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 Ksh10/kwh, compared to about Ksh38/kwh 10 years ago. The figures further indicate that between 2018 and 2019 alone, the price of solar power fell by 13%.

The director of Corporate & Institutional Banking at Co-op Bank, Ms Jacquelyne Waithaka, said the challenge banks and other financiers face in financing solar energy relates to the kind of securities that customers offer as collateral. Solar panels and inverters, for instance, are not a preferred security because they cannot be easily liquidated in case of loan default, Ms Waithaka said.

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“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,” she said.

Energy costs remain one of heaviest input costs for many MSMEs. The partnership between Co-op Bank and AGF is expected to have positive impact on MSMEs involved in manufacturing, light industry and agroprocessing 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,” Ms Waithaka said.  “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.”

Mr Franck Adjagba, AGF Group Director of Business Development, reaffirmed the Fund’s commitment to promoting sustainable economic growth in the country.

“Banks in Kenya are in dire need of risk mitigating instruments to support their lending activities to SMEs,” he said. “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.”

Through this partnership, Co-op Bank will make these opportunities available to customers across the country.

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