Kenya is expected to witness a significant financial endeavor as banks gear up to vie for a substantial portion of the Sh50 billion green fund which has been backed by the World Bank. The initiative aims to bolster small and medium-sized enterprises (SMEs) engaging in climate change mitigation efforts.
Quick Summary:
- Banks will compete for a Sh50 billion World Bank-supported green fund targeting SMEs involved in climate change mitigation.
- The State Department of Investment Promotion (SDIP) will provide seed capital for the green investment fund.
- The fund, structured as a mezzanine loan, will support initiatives such as manufacturing electric vehicles, constructing greenhouses, enhancing water and sanitation, and promoting smart agriculture.
In a report released by the World Bank, Kenyas State Department of Investment Promotion (SDIP) is set to provide funding, for the green investment fund (GIF). This initial funding, structured as a mezzanine loan combining equity and debt will play a role in attracting private sector investments towards eco projects. According to the report the GIFs goal is to support initiatives, like manufacturing vehicles (EVs) building greenhouses, delivering water and sanitation services and promoting agricultural practices.
The SDIP which is currently operating under the Ministry of Investment Trade and Industry, will oversee the execution of the fund through the Kenya Development Corporation (KDC). Banks, particularly those with substantial financial capabilities, will play a pivotal role in disbursing the funds to eligible beneficiaries.
“To crowd in private and IFI (International Finance Institutions) investment, the SDIP – MITI through KDC will serve as the anchor investor by providing junior/mezzanine debt into the Green Investment Fund with provisions for it to take on first losses and to cap its returns,” stated the World Bank in a technical design detail note for the Kenya Jobs and Economic Transformation Project.
The Green Fund will be established as a special-purpose vehicle to administer the proceeds of the World Bank loan and will operate under the regulatory oversight of the Capital Markets Authority. Furthermore, it will be managed by an independent, competitively selected fund manager.
Among the projects earmarked for funding through the GIF are electric vehicles, with equity funding studies by the World Bank estimating a requirement of $211 million (Sh27.4 billion). This funding will support various aspects of EV development, including manufacturing, charging infrastructure, battery technology, and retrofitting.
This initiative underscores Kenya’s commitment to sustainable development and aligns with global efforts to combat climate change. As banks prepare to compete for access to the green fund, the stage is set for transformative investments that will drive environmental sustainability and economic growth in the country.