In East Africa, the French Development Agency, through Diamond Trust Bank (DTB), in partnership with Agence Francaise de Development (AFD) have committed to provide Shs33 billion ($977 million) in renewable energy soft loans for SMEs.
According to local media, the Observer, the loan facilities are aimed at enabling these businesses to invest in renewable technologies such as small hydroelectric power generation, geothermal, biogas, and solar.
Yves Boudot, the regional director for AFD in East Africa said: “This technical and financial offer is particularly important to bringing additional solutions to achieve the diversification of energy resources in East Africa and help the region to move towards sustainable energy solutions that are technically, economically and financially viable.”
More banks needed to offer renewable energy soft loans
Also commenting on the alliance was Varghese Thambi, the managing director of DTB, who said the credit line will also promote energy efficiency.
“Even for housing projects or universities or any of the corporate companies that want to reduce their power bills by using photovoltaic solar panels will benefit from the credit line,” Thambi stated.
The media reported that Sophie Makame, the French ambassador to Uganda, encouraged other banks to take up the credit.
“Through this credit line, AFD has decided to provide some long-term, soft and locally-available financial resources. The needs [for loans] being so huge in Uganda, more banks are welcome to join the programme in the coming months,” Makame said.
Regional programme green energy credit line
The Observer reported that the green energy line of credit is one of the components of the large regional programme called SUNREF (Sustainable Use of Natural Resources and Energy Finance).
“This programme will work as leverage; local banks will acquire capacity to be more engaged in this sector in the near future. A significant pipe of potential projects has already been identified and DTB is the first bank to engage in SUNREF in Uganda,” Makame explained.
David Sacotte, the team leader at SUNREF told the media that the credit line also comes with a technical assistance programme, funded by the Africa Infrastructure Trust Fund of the European Union.
The technical assistance will include project design, capacity building, project feasibility study and raising public awareness. Sacotte said this fund is for the private sector with a bias towards SMEs, since it is the SMEs that have a challenge in energy-saving.
“The SMEs to get this will be DTB customers. The loans ranges will be between $50,000 and $1 million and the maximum payback duration will be 12 years. However, that will vary from project to project,” he said.
Thambi added that interest rates will vary from project to project as well and the interest rate will be between 2.5 and 3% for dollar-denominated and about 6% for the shilling-denominated loan.