- Given the limited climate finance flows to Africa, the continent is left with a gap between $200-400 billion per year by 2030.
- In Kenya, World Bank estimates the annual climate and nature financing gap at $5.13 billion (Sh800 billion).
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Kenyan Small and Medium-sized Enterprises (SMEs) championing green transition are among firms set to benefit from a deal between development agency FSD Africa and the financing promoter African Guarantee Fund (AGF).
Targeting the African continent, the deal seeks to provide green SMEs with critical financial support, technical assistance and capacity building, propelling them towards growth.
The agreement outlines a detailed collaboration framework between the organisations in boosting sustainable development in Africa, with the main aspects involving assistance in the development of financial products for institutions.
Offering partial credit guarantees for bonds and funds raised on behalf of SMEs and conducting capacity-building events are other key aspects of the deal.
Through the provision of financial support and business growth enhancement, the SMEs are expected to play a pivotal role in reducing CO2 emissions, aligning to the 2050 net zero goals.
They are also expected to generate and sustain employment opportunities, especially for youth and women.
Commenting on the deal, FSD Africa CEO Mark Napier said the move is an important milestone in the efforts to foster sustainable economic development in Africa.
“By leveraging the strengths of FSD Africa and the African Guarantee Fund, we will actively create a robust ecosystem that empowers green SMEs, aiming to facilitate access to affordable long-term funds, thereby accelerating the transition towards a greener and more resilient economy,” Napier said.
AGF Group CEO Jules Ngankam reiterated the importance of green economic transformation in Africa, saying the partnership will endeavor to provide financial institutions with bank fundraising guarantees.
"This is to enable them access affordable funds aimed at facilitating loans to SMEs investing in low carbon and climate resilient businesses," Ngankam said.
“Additionally, we will seek to extend partial credit guarantees to lenders in a bid to enhance credit accessibility for green SMEs.”
The two organisations will also provide technical assistance on green financing initiatives, a strategy the two parties term critical in building the capacity of key stakeholders such as governments, financial institutions and green SMEs.
A report by the World Economic Forum shows Africa stands at a critical juncture in its fight against climate change.
At COP27, the resounding call echoed across the continent and beyond with the international lobby saying bridging the climate finance gap is not just a priority, but it's also an existential necessity.
It says climate policy initiative projects need $2.8 trillion from 2020 to 2030.
“Given the limited climate finance flows to Africa, the continent is left with a gap between $200-400 billion per year by 2030,” it says.
“This climate finance gap poses an imminent threat to Africa's ability to adapt, mitigate and build resilience against the adverse impacts of climate change."
In Kenya, the World Bank estimates the annual climate and nature financing gap at $5.13 billion (Sh800 billion), which is more than the country’s development budget of Sh743.5 billion in the current financial year.
WEF therefore notes that the urgency of the matter demands a transformative and innovative approach, one that goes beyond the traditional avenues of financing, and renewed global climate action for fragile and developing countries.