AfDB to Back Credit Guarantee Companies for Climate Finance in Africa
TLDR
- AfDB plans to invest in credit guarantee companies to boost financing for climate and sustainability projects in Africa.
- The investment includes shareholdings in companies in Ghana and either Senegal or Ivory Coast, expanding from previous investments in Dhamana Guarantee and Infrastructure Credit Guarantee in Nigeria.
- Dhamana Guarantee, with AfDB's backing, will focus on climate projects in East Africa to attract investments from pension funds, insurers, and sovereign wealth funds.
The African Development Bank (AfDB) plans to invest in two additional credit guarantee companies to enhance financing for climate-related and sustainability-linked projects in Africa.
Credit guarantees aim to derisk investments and draw more private capital. The AfDB will take shareholdings in credit guarantee companies in Ghana and either Senegal or Ivory Coast, expanding its previous investments in Dhamana Guarantee and Nigeria-based Infrastructure Credit Guarantee.
AfDB has already invested $10 million for a stake in Dhamana, which provides guarantees to boost credit ratings and attract investment from pension funds, insurers, and sovereign wealth funds. Dhamana will focus on climate projects across East Africa, with backing from InfraCo Africa and CPF Financial Services. These guarantees will be structured based on prudential limits in collaboration with credit rating providers.
Key Takeaways
AfDB’s continued investment in credit guarantee companies signals a push to attract private capital for climate projects across Africa. The continent lags in private capital for climate initiatives, attracting just 14%, compared to an average of 40% in other emerging regions. By de-risking investments, the initiative aims to bridge the financing gap for sustainability efforts on the continent, creating opportunities for increased participation from institutional investors.
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