NDF - Financing for climate change and development projects

Future of climate change finance lies in Africa

Photo: Marjo Koivumäki
Photo: Marjo Koivumäki
Illustration by Sanna Turunen

SMEs the new engine for green growth and development

Speaking as a guest panellist at NDF’s recent anniversary event, Felix Bikpo, Group CEO of the African Guarantee Fund for Small and Medium-sized Enterprises (AGF) said: “Businesses in Africa are just starting to understand that if they don’t factor climate change into their financial models, there will be no future business. And NDF is a critical partner in getting us there.”

SMEs can have a transformational impact
Bikpo went on to cite a lack of coordination among key stakeholder groups in Africa as one of the biggest barriers to progress. This is combined with the need to unlock commercial lending to the rising number of small and medium-sized enterprises (SMEs), showing commitment to green growth and climate resilience in African economies.

The statistics bear this out. SMEs now account for up to 90% of all businesses in sub-Saharan economies and the sector is the largest provider of employment. “So, growth here can have an enormous transformational impact on both the economy and the environment, while driving down poverty levels,” Bikpo says.

NDF funding drives SME climate-focused loan guarantee
In 2016, NDF entered a financing agreement with AGF to provide capital, which to date, amounts to USD 17.1 million in equity. Together the two institutions launched the Green Guarantee Facility, a climate-focused loan guarantee for SMEs.

In less than two years, AGF has managed to leverage NDF’s original capital by a factor of 7:1, providing more than USD 50 million in direct financing to SMEs in clean energy and climate smart agriculture. An estimated 28,000 jobs have already been created under AGF Green Guarantees accounting for a reduction of around 250,000 tons of CO2.

“This financing deal was really a watershed for both parties.” NDF Manager, Charles Wetherill recalls. “For NDF, it was the first direct private sector financing deal of our new climate mandate, opening up space for us to accelerate and deliver climate impacts that going beyond pure grants.” And for AGF,” Wetherill continues, “it was NDF’s engagement that truly catalysed AGF’s rise as a green finance pioneer for Africa’s financial sector.”

Time for action in Africa is now
A further USD 3.3 million in NDF grant support to AGF has also gone towards giving African financial institutions the knowledge and capacity they need to scale up lending to the green economy – including the rollout of a series of Green Finance Conferences and trainings in Zambia, Kenya, Ghana, Cote d’Ivoire, and most recently in Senegal, December 2019.

In his remarks, Bikpo thanked NDF for being so flexible in identifying the right new technologies and solutions as well as for their investments that could be leveraged for much larger sums from institutional and other traditional investment sources. 

“In Africa we don’t need money. The money exists in the banks,” says Bikpo. “The financial capital is there. It’s now just a matter of convincing banks to take the right actions. And they need to start now.”

Written by Laurel Colless

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