Co-operative Bank of Kenya has signed a deal with African Guarantee Fund (AGF) for Small and Medium-sized Enterprises amounting to Sh750 million to increase financing of green transactions in Kenya.

The guarantee facility will enable the Nairobi Stock Exchange listed lender deepen commitments to financing Micro, Small and Medium-Sized Enterprises (MSMEs) while promoting green energy and solar installation projects within the Kenyan corporate sector.

“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,” said AGF Group Director of Business Development Franck Adjagba.

Green financing

Green energy is one of the key energy sub-sectors that contribute to the overall energy mix in Kenya and the International Renewable Energy Agency, increased demand and technological advances saw a drop in the cost of solar photovoltaic (PV) systems over the years, with the cost of solar power having dropped by 13 per cent between 2018 and 2019.

Co-op Bank Corporate and Institutional Banking director Jacquelyne Waithaka said the challenges faced by banks and other financiers when funding solar energy includes scrutiny of collateral for credit.

“Solar panels and inverters, for instance, are not a preferred security because they cannot be easily liquidated in case of loan default.

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.

Waithak said as Kenya strives to meet the goal of universal access to electricity, huge development needs to take place in Kenya’s energy sector.

A surge in energy costs affects efforts meant to push universal access to electricity. “

Co-op Bank expects as prices of solar technologies drop, and AGF continues to develop other products, a greater number of Kenyans will afford renewable energy products and services.