09/23/2024 | Press release | Distributed by Public on 09/23/2024 13:20
This paper explores opportunities in Ethiopia, Kenya, Uganda, and Tanzania to mobilize and scale up financing for the fast-growing PURE sector, which drives energy access and economic growth. It highlights the critical role of local financial institutions (LFIs) in accelerating PURE lending to small- and medium-sized enterprises (SMEs) and end users in East Africa. Recommended interventions in this paper focus on eliminating existing barriers and galvanizing interest from investors, entrepreneurs, development partners, and local governments.
This Working Paper is part of Energy for Development Initiative within Energy Access. Reach out to Benson Ireri for more information.
This Working Paper is part of Energy for Development Initiative within Energy Access. Reach out to Benson Ireri for more information.
Unlocking local private capital to finance the productive use of renewable energy (PURE) sector - a look at East African local financial institutions (LFIs) helps to unleash the transformative potential of PURE technologies to extend energy access, enhance food security, generate local income, stimulate economic growth, improve livelihoods, and drive clean energy demand. PURE is particularly needed among rural and lower-income demographics, such as Sub-Saharan Africa (SSA), who either lack electricity access or cannot afford it.
Despite significant demand and market potential in Africa, PURE applications are not fully adopted and scaled, mainly due to high up-front costs and inadequate financing for small- and medium-sized enterprises (SMEs) and end users. Local financial institutions (LFIs), which have close ties to local communities and knowledge of local markets, can be pivotal in addressing this challenge.
Our research and surveys across LFIs in Ethiopia, Kenya, Uganda, and Tanzania revealed a strong interest in expanding PURE lending, especially for agriculture. However, LFIs in East Africa face multiple constraints, including limited staff capacity, insufficient funding sources, credit risks, and a need for concerted support from development partners and policymakers for capacity-building, blended finance, and de-risking instruments such as loan guarantees.
This working paper recommended interventions allowing LFIs to play a more instrumental role in funding PURE investment and addressing affordability and other challenges. For example, LFIs can take steps to aggregate demand and incorporate PURE as a distinct lending category or subcategory within their portfolios. They can also collaborate with development partners to channel funding and financial options to end users.
Working to extend affordable, reliable and clean energy to all people.
Africa Lead, Energy Access