On December 22, 2023, the International Finance Corporation (IFC) announced a significant financing collaboration with the Facility for Energy Inclusion (FEI), a pan-African fund dedicated to supporting small-scale decentralized renewable energy (DRE) projects. The funding aims to enhance access to clean and reliable energy, particularly in Africa’s commercial and industrial sectors, contributing to economic growth and sustainability.
- Financing Package Overview: The IFC’s financing package amounts to €35.5 million and targets the expansion of energy generation capacity by about 115 MW across 15 African countries, including the Democratic Republic of the Congo, Ghana, and Kenya. The comprehensive package comprises a €30 million loan from IFC, a €20 million loan mobilized from the Managed Co-Lending Portfolio Program (MCPP), and up to €30 million in blended finance.
- Blended Finance Structure: The blended finance component includes €15 million from the International Development Association’s Private Sector Window Blended Finance Facility and €15 million from the Finland – IFC Blended Finance for Climate Program. This innovative structure leverages different funding sources to provide longer-term financing not readily available in the market.
- DRE Market Development: FEI, recognized as a leading lender in the DRE market in Africa with $220 million commitments across 23 countries, will utilize the IFC partnership to further develop the sector. The funding signifies a vote of confidence in Cygnum Capital as a fund manager, with a $20 million tranche from institutional investors.
- Economic and Social Impact: The investment is expected to support the development of Africa’s DRE market, attracting local and international private investment. With approximately 600 million people in sub–Saharan Africa lacking access to electricity, the DRE market provides a climate-friendly solution for expanding access affordably.
- Displacement of Carbon-Intensive Sources: Many African countries face challenges with utilities providing consistent and affordable electricity, leading to power outages and reliance on fossil fuel backup generators. The project aims to displace carbon-intensive power sources, enhancing access, affordability, and the quality of electricity supply.
- Alignment with World Bank Group’s Strategy: IFC’s investment in FEI aligns with the World Bank Group’s strategy to accelerate electrification in Africa, with a goal of achieving universal access by 2030.
The partnership between IFC and FEI marks a significant stride towards enhancing clean and reliable energy access in Africa. The financing package not only supports the expansion of energy generation capacity but also aligns with broader developmental goals, including economic growth, job creation, and sustainability. This collaboration underscores the pivotal role of private sector investments in driving positive change and addressing energy challenges in emerging markets.