Development organization organizes a forum to address the challenges facing green financing in Kenya and the possible solutions
By George Gichuki
The need to mitigate against the vagaries that are associated with climate change (and to adapt to the same) has led to a huge appetite for green financing among policy makers and investors globally. In Kenya, there is a vibrant policy environment in so far as going green is concerned. To that end, the government has developed a master plan for going green: the National Green Economy Strategy and Implementation Plan (GESIP). Nevertheless, despite the existence of numerous opportunities in green financing, players in the local finance sector ( including commercial banks, microfinance banks, microfinance institutions and Saccos), have not fully seized them.
To address this challenge, the Micro Enterprise Support Programme Trust ( MESPT), recently hosted a strategic green financing partnership meeting for financial institutions, policy makers from the government, representatives of donor institutions and other key stakeholders engaged in sustainable development and green financing. MESPT is a development organization established for the purpose of solving pressing challenges like poverty alleviation, promotion of sustainable economic growth as well as creation of employment for micro, small and medium enterprises (MSMEs). “Kenya has been the largest market for solar systems in Africa and for the last two years, over five million units have been sold locally,” said Mr. Ashington Ngige, team leader, Kenya Off – Grid Solar Access Project at the World Bank. He was the chief guest during the meeting. Mr. Ngige lamented that most local lenders have not fully tapped into this market despite its immense potential and the existence of a vibrant policy environment in green financing. “The government has formulated very progressive climate laws and it is fully committed to going green,” Mr. Ngige observed.
By the same token, Mr. Charles Nyawade, the acting chief executive officer, MESPT, observed that there is a big disconnect between financial institutions and providers of green technology. This has limited the uptake of green financing in Kenya. “We shall use the lessons learnt in this forum to come up with solutions that will address this gap,” Mr. Nyawade added.
MESPT offers a green financing product in its loan portfolio. “From a programme that we have been running in the last three years, we have established that the uptake of green technology in the country is very low because financial institutions and end users are not well informed about it,” said Mr. Eliud Wachira, MESPT’s senior credit officer and the acting credit and business development manager. “We have therefore organized a number of forums countrywide to sensitize financial institutions, end users and manufacturers on the need to be proactive in marketing green technology,” he added. He further said that these initiatives have paid off and MESPT has funded six organizations to the tune of Kshs.93 million in the last two years, demonstrating that there is a huge opportunity in this market.
However, according to Mr. Wachira, the growth in this market has been hampered by poor quality of some products on offer and lack of a firm working relationship between the players involved. “All the partners in this business need a firm memorandum of understanding with very clear deliverables, for instance, a commitment to offer the end users after sales service,” emphasized Mr. Wachira. MESPT has observed that failure to have such deliverables clearly pointed out to a large extent contributes to default on loan payments.
Among the lenders that MESPT has partnered with in the provision of green financing is Bimas Kenya, a credit only microfinance institution with a major presence in the rural area. “We have partnered with MESPT for the last seven years and this has had a huge impact on our target market,” said Dr. Patrick Gathondu, the chief executive officer, Bimas Kenya, during the forum. “ Majority of the customers that we serve are marginalized and they are not served by the national grid forcing them to rely on unclean energy ( like kerosene and firewood) for lighting and cooking,” Dr. Gathondu added. To address that challenge, Bimas finances them to install solar energy systems in their homes that are offered on pocket friendly prices.
In the Eastern region of Kenya (especially Kitui and Makueni) where farmers rely heavily on irrigation in order to grow fruits like mangoes, Bimas has been financing them to acquire solar powered water pumps as opposed to relying on the ones using petrol or diesel. Such farmers have therefore cut down on their production costs, making their enterprises profitable.
Even as Bimas continues to popularize the uptake of green technology among its customers, Dr. Gathondu observes that most of them have not yet appreciated its benefits. “All the stakeholders in this field should join hands in carrying out a major awareness campaign on the benefits of going green which should lay emphasis on the fact that this is a profitable business,” Dr. Gathondu advises. “As a wholesaler, MESPT should invest in such a campaign in order to create demand for green technology, which will in turn raise the level of financing,” he adds. He also laments that currently, BIMAS is advancing solar powered water pump loans to its customers in very small amounts and on a short term basis, hence adversely affecting their impact. “We are planning to scale up these loans and increase their payment period so that they can have impact on agribusiness,” Dr. Gathondu avers. In his opinion, the end users (farmers in this case) can only have a good return on their investment if the loans are tailored to meet their needs.
Esther Altorfer is the chief executive officer of Sistema.bio. She heads the East African region. Sistema.bio is one of the leading biogas companies in the world. It was started in Latin United States of America in 2010, before spreading its wings to India and Kenya in 2017. Since its inception, the company has partnered with over 3,000 small holder dairy farmers in Kiambu, Kericho, Bomet, Meru and Embu counties. “We manufacture and sell high quality bio-digesters to the dairy farmers,” said Altorfer. “This product has a ten year warranty and if need be, we extend loans to the farmers so that they can purchase it,” she added. According to her, the company’s major challenge is that it has not been able to bring on board many green financing lenders. This has forced it to extend loans to its customers, even though that is not its core business. “We need to work with as many lenders as possible in order to accelerate green financing and the growth of green energy opportunities for the Kenyan farmers,” Altorfer avered.
Needless to say, as a country, we are barely scratching the surface of green financing. Going by the global and local market trends, it is an area with huge opportunities for growth that can be tapped into if its stakeholders are able to identify and fix the existing gaps. “Maybe, we need to assemble a team of experts that will help in pooling resources and developing concepts that will go a long way in making green financing attractive in Kenya,” Mr. Ngige advised the stakeholders.
In addition, Mr. Nyawade said that MESPT is partnering with financial institutions in developing loan products for green energy. “In most of the financial institutions, the loan portfolio for agriculture is less than 10% and we are therefore supporting them to develop products that meet the farmers’ needs,” he said, adding that will lead to the growth of green financing.
On his part, Mr. Wachira observed that lenders offering green financing should be given the necessary technical support. “Product financing – especially for renewable energy – is unique and therefore financial institutions require technical support in order to drive its growth,” he concluded.