How banks can navigate carbon markets financing to unlock more funding
The Africa Guarantee Fund is looking to unlock nearly billions of dollars targeting green financing and climate related interventions in commercial lending to banks within East Africa in the next five years. CNBC Africa spoke to Patrick Lumumba, Group Director, Capacity Development, Africa Guarantee Fund for more.
Tue, 12 Sep 2023 14:52:32 GMT
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AI Generated Summary
- The Africa Guarantee Fund aims to unlock billions of dollars for green financing and climate interventions in East Africa over the next five years.
- Kenyan banks are leading the way in aligning their funding strategies with ESG standards, but the clean cooking sector presents a significant untapped opportunity for growth.
- The fund is pioneering innovative financing solutions and providing capacity development grants and technical assistance to empower financial institutions to invest in green finance projects.
The Africa Guarantee Fund is on a mission to unlock nearly billions of dollars targeting green financing and climate-related interventions in commercial lending to banks within East Africa over the next five years. In an exclusive interview with CNBC Africa, Patrick Lumumba, Group Director of Capacity Development at Africa Guarantee Fund, shed light on the organization's ambitious plans and the critical need for stakeholders, especially financial institutions, to embrace this new business segment. Lumumba emphasized the importance of orienting commercial banks towards opportunities in clean cooking energy projects, highlighting the challenges and solutions provided by Africa Guarantee Fund, Clean Cooking Alliance, and other stakeholders. The aim is not only to support the financial institutions but also to have a positive impact on the environment and communities in Africa. According to Lumumba, Kenyan banks are ahead of the curve when it comes to aligning their funding strategies with environmental, social, and governance standards. The Central Bank of Kenya has already issued guidelines on climate risk-related measures, pushing banks to integrate ESG principles into their lending frameworks. Despite this progress, the clean cooking sector remains a relatively untapped market for Kenyan banks, presenting a significant opportunity for growth and development. Lumumba stated that the Africa Guarantee Fund is committed to supporting banks in this area through capacity development grants and guarantee funds. The sheer size of the clean cooking market makes it a lucrative opportunity for financial institutions. Lumumba estimated that the fund aims to unlock financing of about $10 billion over the next five years, targeting green and climate financing initiatives, with clean cooking projects playing a crucial role in this strategy. The fund's innovative approach includes blended financing options tailored to the specific needs of financial institutions. Lumumba highlighted the importance of capacity development and technical assistance grants to enhance the banks' ability to effectively lend to the clean cooking sector. These initiatives not only address the perception of risk associated with green SMEs but also provide practical solutions and mitigation measures to ensure the success of green finance projects. The ultimate goal is to empower financial institutions to confidently invest in green finance and create a positive impact on Kenya and the broader African continent.