Green Energy Businesses: The Co-operative Bank of Kenya has signed a loan guarantee agreement with African Guarantee Fund (AGF) that will see the bank lend up to Sh. 750 million to small and medium businesses involved in green energy.
Dubbed as Loan Portfolio Guarantee Agreement, the new deal will not only enable Co-op Bank to strengthen its endeavour to finance micro, small and medium businesses, but will also promote emerging businesses 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 per cent since 2010 while the leveled cost of energy generated by large scale solar plants is currently below Sh. 10 per kilowatt compared to about Sh. 38 per kilowatt ten years ago. The data further indicates that between 2018 and 2019 alone, the price of solar power fell by 13 per cent.
How Co-op Bank breathed new life into loss-making small bank
According to Jacquelyne Waithaka, the Director of Corporate and Institutional Banking at Co-op Bank, banks and other financiers have been facing difficulties in financing solar energy due to the type of collateral offered by customers seek loans. “Solar panels and inverters, for instance, are not a preferred security because they cannot be easily liquidated in case of loan default,” she says. To bridge this gap, Co-op Bank’s partnership with AGF has created an instrument that will give the lender 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,” she said.
Ms. Waithaka noted that 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,” she said.
Her sentiments were echoed by the AGF Group Director of Business Development Franck Adjagba who reaffirmed AGF’s commitment in promoting a sustainable economic growth in the country.
“Our partnership with Co-op Bank today reflects our commitment to increase financing of businesses in the green sector. Sustainability improves the quality of our lives, protects our ecosystem and preserves natural resources for future generations,” he said.