In sub-Saharan Africa, only 40% of people have dependable energy access. This partnership aims to increase widespread access to renewable, sustainable energy in the region by offering the risk mitigation provided by first loss cushions for lending to the off-grid sector.
According to the IEA’s 2017 study, in order to achieve electrification for all in sub-Saharan Africa, approximately USD 50 billion needs to be invested every year by 2030. Through their analysis of 19 West African countries alone, lead partner GreenMax Capital Group identified more than USD 13 billion in real commercial demand for off grid solar products there – suggesting a ready market.
While many specialized African debt funds are already engaged in off grid lending with first loss structures in place, usage has been ad hoc – there is little understanding among investors and providers about what risk-adjusted returns for first loss cover should be and the level of pricing needed to make first loss facilities both sustainable, more widely used and accessible.
The Green 4 Access First Loss Facility partnership is resolved to improve this financing structure and establish a universal platform for first loss facilities to support energy access lending. Through industry-wide data collection and analysis, the partnership will design and offer first loss products that allow lenders to perceive Sub Saharan solar loans as sufficiently de-risked, while simultaneously allowing the fund’s investors to achieve adequate and commensurate returns.
While a good deal of data analytics already exist for the "pay-as-you-go” solar space, a methodical and market-wide approach for other off grid sub-sectors has not been undertaken and would facilitate wider use of first loss facilities. A robust, sustainable first loss facility available to the full off grid sector would decrease lenders perceptions of key credit risks (off-taker credit, forex risks, wariness of business models/collateral values) and help accelerate lending for energy access.
Through this modern and inclusive approach to green energy finance, Green 4 Access First Loss Facility aims to increase total energy access in sub-Saharan Africa – supporting activities such as dependable education, reliable hours for small business owners and customers, regular internet access and more.