The Board of Directors of the African Development Bank (AfDB) has approved a multinational financing program for distributed energy service companies (DESCOs).

The program will contribute to the installation of an estimated 45 MW of distributed solar photovoltaic (PV) projects which will provide clean energy access to 900,000 households (4.5 million people) by 2025.

The ‘DESCOs Financing Program’ promotes securitization financing techniques to address barriers to accessing finance for DESCOs, while supporting their growth and expansion in existing and new markets. The program will also facilitate local currency financing for DESCOs and provide local lenders with risk mitigation instruments to support them.

Elaborating on the program, Wale Shonibare, AfDB’s Acting Vice-President for Power, Energy, Climate Change, and Green Growth said, “The bank will provide critical technical guidance and credit enhancement to DESCOs and local financial intermediaries.”

“Accelerating access to universal, affordable, reliable, sustainable, and modern energy for underserved populations requires innovative financing solutions. Innovations such as receivables-backed financing structures provided by the program are vital in the bank’s efforts to unlock private sector participation and local currency financing for the energy sector,” Shonibare added.

Stefan Nalletamby, AfDB’s director for Financial Sector Development, said the program would help build capacity within DESCOs and local financial intermediaries in executing securitization structures and other innovative frameworks for accessing finance. “It will also promote financial inclusion by availing consumer financing to customers in rural areas, building credit history, and encouraging the uptake of mobile payment solutions,” Nalletamby added.

Solar home systems present commercially viable, climate-resilient, and modern solutions to provide clean energy access to off-grid populations in Sub-Saharan Africa. DESCOs have seen extensive growth owing to the rapid proliferation of mobile banking and pay-as-you-go (“PAYGo”) technologies that allow low-income customers to pay off their purchases over an extended period.

“This program will enhance the impact of DESCOs by enabling them to access financing that is tailored to their operations. It is also a great example of collaboration between the European Commission and the African Development Bank,” said Dr. Daniel Schroth, AfDB’s Acting Director for Renewable Energy and Efficiency.

Meanwhile, according to the latest PAYGo Market Attractiveness Index, India has achieved a high score in the overall numbers, demonstrating a relatively robust performance in the sector and Asia as well. Indonesia and Kenya were top performing countries in the PAYGo model for the off-grid market.

Last year, the AfDB approved a ~$27.78 million proposal to secure a loan from Société Générale de Banque in Côte d’Ivoire (SGBCI), Crédit Agricole Corporate, and Investment Bank (Crédit Agricole CIB) to help Zola EDF Côte d’Ivoire (ZECI), an African solar power kit supplier. The loan was to be made available in the local currency, and AfDB was the partial credit guarantor by covering part of the guaranteed loan facility. The initiative aimed at providing solar home systems to approximately 100,000 rural households based on pay-as-you-go (PAYGO) model.

Image Credit: AFDB