Author: 5iveafrica

ARM-Harith and FSD Africa Investments Announce GBP 10m Commitment to Unlock Nigerian Pension Funds and Catalyse Local Capital for Infrastructure

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FSD Africa Investments (FSDAi), the UK-backed specialist development finance investor, is investing GBP 10 million into ARM-Harith’s Climate and Transition Infrastructure Fund (ACT Fund) to unlock local institutional capital for climate infrastructure. ARM-Harith Infrastructure Investment Limited is a leading African private equity firm committed to catalysing economic growth through sustainable infrastructure.

ARM-Harith and FSDAi’s investment introduces an innovative solution to allow Nigerian pension funds to address a longstanding challenge in infrastructure equity finance: the ability to invest while receiving early liquidity. By enabling predictable interim distributions during the early phases of investment, this innovative facility directly addresses a key barrier that has historically deterred domestic institutional capital from entering the asset class.

In addition, 75% of the FSDAi facility will be provided in local currency — a first-of-its-kind approach specifically designed to mitigate the impact of foreign exchange volatility for pension funds. This structure is expected to unlock an additional GBP 31 million in pension fund contributions — nearly five times the participation achieved in ARM-Harith’s first fund.

FSDAi’s investment aligns with its broader mission to deepen African financial markets towards accelerating the financing of Africa’s green economic transformation and will support the Fund’s investments in climate-resilient infrastructure including energy, transport, water, and digital connectivity. In alignment with at least four of the UN’s Sustainable Development Goals, the initiative is projected to create or support approximately 3,000 green jobs.

The British Deputy High Commissioner in Lagos, Mr. Jonny Baxter said,

“The UK government, through its bilateral and investment vehicles is committed to continue to support the country’s financial sector — developing domestic capital markets as a means of financing priority sectors and driving economic development. Local currency capital helps mitigate the impact of foreign exchange volatility, narrows the financing gap, supports diversification into new asset classes and into climate-related projects and social sectors – while providing long-term funds to growing businesses.”

Announcing FSDAi’s investment, FSDAi’s Chief Investment Officer, Anne-Marie Chidzero said:

“We are thrilled to collaborate with ARM-Harith to showcase how risk-bearing capital from a market-building investor like FSDAi can be strategically structured to unlock domestic institutional capital. This approach strengthens Africa’s financial markets and facilitates capital allocation towards sustainable, green economic growth across the continent.”

ARM-Harith CEO Rachel Moré-Oshodi emphasized the significance of this investment:

“For too long, domestic pension funds have remained on the sidelines of infrastructure equity due to liquidity constraints and heightened perception of risk. We are proud to have collaborated with FSDAi to design a pioneering solution that reduces risk for pension funds while delivering both early liquidity and long-term capital growth. This is a global first—a groundbreaking private sector-led solution that could fundamentally change how infrastructure equity is financed—not just in Nigeria, but across Africa.”

Bank of Industry and FSD Africa Collaborate to Drive Green Finance Initiatives in Nigeria

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Lagos, Nigeria – The Bank of Industry (BOI) is pleased to announce a significant milestone in its commitment to promoting sustainable finance in Nigeria with the formal signing of a Memorandum of Understanding (MOU) with FSD Africa, a leading agency dedicated to strengthening climate financing in financial markets across Africa.

Under this partnership, FSD Africa will deepen BOI’s sustainability finance proposition, providing technical assistance, strategic guidance, and capacity development initiatives. This will involve supporting the bank in strengthening its sustainability strategy, delivering decarbonisation pathways and advancing its adaptation finance initiatives. These resources will better position BOI to offer tailored lending solutions and business support for Nigerian climate-focused projects, further solidifying its position as a key driver of green finance in the country. 

The MOU establishes a robust framework for collaboration, enabling BOI to expand its climate financing portfolio and support enterprises committed to sustainability. This partnership will deepen BOI’s impact in fostering climate-resilient economic growth across Nigeria.

Speaking at the signing ceremony held at BOI’s headquarters in Lagos, BOI Managing Director/CEO Dr. Olasupo Olusi said:

“This partnership with FSD Africa is a critical step in our efforts to promote climate resilience and sustainability as one of our central pillars of our operations. Together, we will pioneer innovative solutions that address the challenges of climate financing while unlocking opportunities for businesses and communities across Nigeria.”

Representing FSD Africa at the event, Dr. Evans Osano, Chief Financial Markets Officer, said:” Our partnership with BOI in advancing sustainable finance is pivotal at this critical time. Nigeria’s annual climate finance gap is estimated at USD27.2 billion. Bridging this gap requires concerted effort including catalysing domestic capital in addition to international investments to drive sustainable investments.  We are excited about the bank’s commitment to promoting climate transition and driving Nigeria’s climate commitments towards net zero, and we are happy to be part of this journey.”

The MOU aligns with BOI’s recently launched three-year strategic plan, which prioritizes climate and green finance as key focus areas.

“With the support of strategic partners like FSD Africa, we are confident that BOI will continue to play a leading role in fostering sustainable development and driving positive change across Nigeria’s economic landscape.”Dr. Olusi added.

This partnership represents the beginning of a transformative journey, creating a framework for innovative and impactful collaboration. BOI and FSD Africa reaffirm their shared commitment to advancing the climate finance agenda in Africa and addressing the pressing challenges of climate change.

Ethiopia’s new securities exchange aims to unlock interbank liquidity

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By Michael Habte is ESX’s chief operating officer and Victor Nkiiri is a senior specialist – capital markets at FSD Africa

Ethiopia, Africa’s second most populous country, is among the fastest-growing economies in the world, with GDP growth projected at 6.5 per cent in 2025. The country has adopted a bold vision to achieve lower-middle-income country status by 2030, underpinned by sweeping economic reforms to transition from a state-controlled to a market-driven economy. 

Among the new economic initiatives recently rolled out is a new securities exchange, the Ethiopian Securities Exchange, or ESX, planned for launch on January 10. For decades, Ethiopia’s financial an interbank trading platform. Simply put, banks could not effectively lend to one another, resulting in high interest rates to borrowers and significant inefficiencies in bank liquidity management. Such inefficiencies have constrained businesses, particularly the small and medium-sized enterprises which are the backbone of Ethiopia’s economy. 

The new exchange is already addressing this challenge. An interbank trading platform which is part of the exchange is optimising liquidity and improving credit flow in the banking system. Since its pilot in late October, the platform has facilitated trades exceeding 135bn birr($1.1bn), demonstrating robust uptake by the banking sector. 

Regulatory reforms

This milestone reflects the effectiveness of reforms such as the Interbank Money Market Directive issued by the National Bank of Ethiopia, which created the necessary regulatory framework. By enhancing price transparency and reducing transaction costs, the platform is already improving credit accessibility for businesses, enabling them to grow, innovate and drive economic activity.

The impact of the ESX extends far beyond the banking sector. A functional interbank market itself is the foundation for developing critical financial instruments such as treasury bills, corporate bonds and commercial papers. These instruments rely on liquid money markets for effective pricing and execution. With its state-of-the-art electronic trading platform that is integrated with the central securities depository, the ESX is well-positioned to facilitate the efficient issuance and trading of these instruments.

The exchange is also a critical enabler of economic diversification. By reducing borrowing costs and expanding access to finance, it empowers businesses to invest in new projects, expand operations and create jobs. These outcomes align with Ethiopia’s ambitions to achieve middle-income status and build a globally competitive economy. 

Establishing the new securities exchange has been a challenging yet rewarding endeavour. To succeed it needed support from a wide spectrum of actors. The public-private partnership model facilitated this, tapping the power of collaboration to drive financial innovation. Ethiopian Investment Holdings, in partnership with FSDAfrica and the Ministry of Finance, worked hand in hand to develop the exchange, in an approach that prioritised market development initiatives that addressed local challenges while adopting global best practices. This ensures that the ESX is not only tailored to Ethiopia’sunique needs but also equipped to compete on the global stage.

Blueprint for innovation
As Ethiopia integrates into global financial markets, the ESX has the potential to position the country as a regional hub for capital market activity. This integration will strengthen Ethiopia’s appeal to foreign investors, unlocking new opportunities for economic growth. Beyond its immediate economic impact, the ESX also serves as a powerful symbol of Ethiopia’s ambition and potential. It exemplifies the transformative role that well-structured capital markets can play in fostering inclusive growth and economic resilience.

The new bourse is also anticipated to inspire other African nations to pursue similar reforms, unlocking the continent’s immense economic potential. Institutions like FSD Africa, which has been instrumental in supporting the ESX, are poised to replicate these lessons in countries that lack functional capital markets. Such efforts are vital for modernising Africa’s financial systems and driving sustainable development.

The launch of the ESX is not just a win for Ethiopia but a blueprint for capital market innovation across the continent.

Ethiopian Securities Exchange Launch Marks a New Dawn for Ethiopia

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The Ethiopian Securities Exchange (ESX) was officially launched today in a colorful event officiated by Prime Minister Dr. Abiy Ahmed. The exchange, established by the country’s sovereign wealth fund, Ethiopia Investment Holdings (EIH) in partnership with the Ministry of Finance and FSD Africa, marks a historic milestone in Ethiopia’s economic development.

Licensed by the Ethiopian Capital Market Authority in December 2024 to operate as a Securities Exchange and Over the Counter (OTC) market, ESX is set to revolutionise the nation’s capital markets. By providing equitable access to capital and enhancing liquidity, it aims to support private sector growth in Ethiopia, the second most populous country in Africa and one of the fastest growing economies globally, with projected GDP growth of 6.5 in 2025.

For decades Ethiopia’s financial sector has lacked a strong mechanism for equitable access to capital and liquidity for the private sector. In particular, the lack of an interbank trading platform has meant banks could not effectively lend to one another. This resulted in high interest rates to borrowers and significant inefficiencies in bank liquidity management which has in turn constrained businesses, particularly small and medium-sized enterprises (SMEs).

The new exchange is already addressing this challenge. An interbank trading platform, which is part of the exchange, is optimising liquidity and improving credit flow in the banking system. Since its pilot in late October 2024, the platform has facilitated trades exceeding ETB 135 billion (USD 1.1 billion), demonstrating robust uptake by the banking sector. By enhancing price transparency and reducing transaction costs, the platform is already improving credit accessibility for businesses, enabling them to grow, innovate, and drive economic activity.

ESX’s state-of-the-art multi-asset Electronic Trading Platform, which is integrated with a modern Central Securities Depository for post-trade settlement and clearing, will also support more efficient issuance and trading of financial instruments such as Equities, Treasury Bills and Bonds, Corporate Bonds, Commercial Papers, Repos, and Derivatives. This is expected to attract both domestic and international investors, further strengthening Ethiopia’s financial markets.

ESX CEO Tilahun Esmael Kassahun was optimistic that the new bourse would inject dynamism in the economy and deepen especially the debt market to the benefit of all actors in the ecosystem.

“We see the new securities exchange as a multi-faceted financial infrastructure, providing multiple markets and variety of products, catering for different types of issuers and investors. The Fixed income market will provide a platform to list and trade debt instruments including treasury bills and bonds, corporate bonds and Shariah compliant securities such as Sukuk Bonds.”

On his part, FSD Africa CEO Mark Napier underscored the role of modern and deep capital markets in accelerating the already impressive economic growth momentum of Ethiopia.

“The launch of the ESX is a true game-changer for the country. As an organization running development finance programmes in well over thirty African countries, we know only too well the impact well-functioning and modern capital markets can have in catalyzing economic growth. We are proud to have played a role in the development of this exchange, that will undoubtedly spur equity, fixed income and other innovative financial instruments,” noted Mark.

The launch of ESX follows significant economic reforms in Ethiopia over the past year, including floating the national currency, the Birr, opening the banking sector to foreign competition, and advancing capital market development. The exchange is poised to become a vital platform for raising capital, trading securities, and driving economic transformation.

Building Resilience: A path to food security in Sudan

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Building Resilience: A path to food security in Sudan

As the conflict in Sudan drags on, life becomes more challenging by the day. Since April 2023, when violence erupted mainly between the Sudanese Armed Forces (SAF) and the paramilitary Rapid Support Forces (RSF), everyday life has been thrown into disarray. This ongoing conflict has placed severe strain on Sudan’s food systems, pushing millions into food insecurity and creating a devastating impact on Agricultural production. As of mid-2024, Sudan faces its worst food crisis yet: nearly 25.6 million people are experiencing acute food shortages, with hundreds of thousands on the brink of famine. For many, the 2024 harvest season looks grim, with even lower production than the previous year’s already sharp decline of 46% in national grain output. 

Sudan’s agriculture relies on two primary growing seasons: a summer rain-fed season from May to August, with harvests in November, and a winter season reliant on irrigation from October to December. Sudanese households depend on staple crops like sorghum, millet, and wheat but the ongoing instability and the shortage of basic resources have hindered planting and harvesting cycles. Now, a resilient solution is desperately needed.

A strategic response – the rapid assessment

FSD Africa, in collaboration with British Office Sudan (BOS, also known as FCDO Sudan), commissioned a Rapid Assessment of Food and Payment Systems in Sudan for a Coordinated Food Security Emergency Response in 2023. This initiative aimed to map out immediate actions to stabilise Sudan’s food systems and improve resilience amidst the volatile situation. The findings emphasised the challenges within Sudan’s financial and agricultural sectors and underscored the need for targeted private-sector interventions to lay the foundation for both immediate food security and longer-term economic recovery.

One of the core insights from the assessment was that traditional development programmes are not equipped to operate in Sudan’s ever-changing landscape. What Sudan needs now is a more adaptable, innovative approach – one that supports local food security initiatives and prepares them to scale post-conflict.

Introducing the innovation studio for resilience

Out of this need arose the concept of the “Innovation Studio for Resilience” ISR with a £1.56 million budget, this 12–15 month pilot programme aims to provide on-the-ground support to local food system innovations. The ISR will work directly with Sudanese partners to pilot new financing models and technical solutions that can help to address urgent challenges within the agrifood sector.

Through ISR, FSD Africa and BOS will fund, co-develop and test solutions focused on improving food security and resilience. The studio will prioritise innovations that offer tangible benefits for women and marginalised communities, and small and medium enterprises (SMEs) working in agriculture. The ultimate goal is to prepare the most promising solutions for broader implementation and support Sudan’s long-term food security.

 

Selecting and supporting innovations

 

The ISR will identify innovative projects that address the financing barriers in Sudan’s agrifood sector. By working with private-sector partners, ISR will help them pilot practical solutions that could provide immediate relief and lay the foundation for sustainable growth post-conflict. 

 

Potential projects will undergo a thorough vetting process, with each proposal evaluated based on feasibility, impact potential and the ability to withstand the complexities of the Sudanese conflict environment. Once approved, the selected innovations will receive technical assistance and grant support to help bring their ideas to life.

 

Central to the ISR’s approach is a commitment to action-based learning. In addition to piloting news solutions, ISR will continuously gather market intelligence and share insights with other organisations operating in Sudan. This shared knowledge will not only support the projects themselves but also deepen the understanding of how to finance and build resilience in Sudan’s agrifood sector.

 

 The ISR will operate under a Steering Committee that ensures accountability and strategic oversight. A project management team, led by an implementing partner, will handle daily operations, including liaising with innovation partners, tracking progress and adapting the projects as needed based on real-time insights.

 

Expected outcomes

 

Through the ISR, FSD Africa and BOS aim to foster resilience in Sudan’s agrifood sector.  The ISR’s success could mean:

  1. Enhanced resilience of Sudanese SMEs within the agri-food value chain
  2. Greater employment opportunities, particularly for low-income and marginalised communities and women
  3. Improved evidence on how to overcome market obstacles in Sudan’s conflict-impacted economy
  4. Scalable solutions that can extend beyond Sudan’s borders to benefit other crisis-affected regions

 

The ISR’s learnings will contribute to a deeper understanding of Sudan’s unique financing needs, providing a model for future interventions in fragile communities.

 

Looking forward

 

The ISR is a hopeful step forward in the face of Sudan’s current crisis. By equipping local entrepreneurs with the resources and support they need to innovate, ISR is helping Sudan build a foundation for a more resilient, food-secure future. As these innovations take shape, we look forward to sharing its progress and insights, with the goal of transforming Sudan’s agricultural landscape even in the face of adversity. 

UK Invests USD $5.2 Million in USD $240 Million SME Listed Fund Sponsored by FSD Africa, Targeting Institutional Investors.

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Tuesday, 5 November – The British High Commission Nairobi has announced a USD $5.2 million fund (KSH 667 million) to support Micro, Small, and Medium Enterprises (SMEs) in Kenya. This initiative exemplifies the UK’s commitment as a long-term partner, providing investment solutions that foster growth and job creation.

British High Commissioner to Kenya, Neil Wigan, said:

“We must lower the cost of borrowing for Kenyans. This fund further bolsters the UK’s financial toolkit in Kenya, which has supported long-term job creation and economic growth over many years. It will deliver for all the hardworking hustlers of this country—especially women, young people, and persons with disabilities—who are often pushed to the margins of the Kenyan economy. The UK’s economic relationship with Kenya is the cornerstone of the UK-Kenya strategic partnership, and we look forward to delivering this together.”

The ‘Listed SME Debt Fund,’ sponsored by FSD Africa, aims to mobilize up to USD $300 million (KSH 38.85 billion) of sustainable finance to provide affordable credit to micro, small, and medium-sized enterprises. Of this amount, the fund targets to raise USD $240 million from domestic institutional investors, with the remainder sourced from foreign investors. It is expected to support at least 10,000 MSMEs, benefiting 50,000 households, creating, protecting, and supporting over 89,000 jobs, and improving access to basic services for over 200,000 people.

The fund is not sector-specific and will cater to the diverse needs of Kenyan business owners, ranging from artisans to financiers and farmers, by lowering the cost of borrowing. It will be listed and managed in Kenya, aiming to provide an attractive investment opportunity for Kenyan investors by de-risking investments in MSMEs while still offering attractive returns.

Currently, SMEs in Kenya face interest rates of up to 40%, making it challenging for businesses to grow and create jobs. This fund will also encourage pension funds to invest in sectors that support the flow of goods, services, and labor in Kenya.

Mark Napier, CEO of FSD Africa, stated:

“The SME sector holds tremendous potential for Kenya’s socio-economic transformation, comprising approximately 98% of all businesses and creating a significant number of jobs. FSD Africa is thrilled to launch this innovative fund dedicated to supporting small and medium enterprises in Kenya. This fund will provide affordable credit to businesses that have historically faced challenges in accessing financing. Moreover, it will offer MSMEs a route to growth across borders and support local employment rates and the growth of the Kenyan economy.”

The first close of the fund is targeting USD $100 million. Kenyan institutional investors, including pension funds, have assets under management exceeding USD $30 billion. Despite regulatory approval allowing investment of up to 30% in alternative assets, many have yet to capitalize on this opportunity. The SME listed fund introduces a new asset class, aiding in portfolio diversification and stabilization. This aligns with FSD Africa’s mission to deepen and diversify capital markets through innovation.

SMEs are vital to Kenya’s economic growth, accounting for 98% of businesses and approximately 24% of the country’s gross domestic product. Beyond their economic impact, SMEs serve as essential engines of employment generation, particularly for marginalized groups such as youth, women, and persons with disabilities, providing around 14 million (30%) of jobs.

The announcement was made at a major pan-African Capital Markets conference organized by FSD Africa, a specialist development finance institution fully funded by the UK Government.

FSD Africa Launches Carbon Accelerator Programme for the Environment (CAPE) to Unlock Finance for High-Integrity Nature-Based Carbon Projects in Africa

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FSD Africa Launches Carbon Accelerator Programme for the Environment (CAPE) to Unlock Finance for High-Integrity Nature-Based Carbon Projects in Africa

Nairobi, Kenya [01 November] – FSD Africa is proud to announce the launch of The Carbon Accelerator Programme for the Environment (CAPE), a pioneering initiative designed to catalyse investment into high-integrity nature-based carbon projects across Africa. CAPE addresses two critical challenges: the lack of investment flow into projects that tackle climate change and biodiversity loss, and the need to build confidence in Africa’s nature-based markets.

The programme aims to provide direct support to projects that have significant potential but are struggling to secure full funding. By leveraging a combination of high-quality carbon credits and biodiversity improvements, CAPE seeks to demonstrate that there is a viable commercial business case for investors while offering a solution to integrity challenges in nature-based markets.

 

CAPE will be delivered in partnership with Finance Earth, a leading independent impact investment advisory firm, as the implementing partner, and the Africa Natural Capital Alliance (ANCA), a collaborative coalition focused on mobilising private capital for nature-based solutions in Africa, as a core partner.

 

Nature-based carbon project developers are invited to register interest in the programme following this link, to receive an Expression of Interest form in the coming days. Following the selection process, CAPE will deliver project development funding and technical support to up to 5 projects for a year from Spring 2025.

Reshma Shah, Lead Carbon Markets, FSD Africa

“Having just returned from COP16 Biodiversity, the urgency of accelerating nature-based solutions that address both climate change and biodiversity loss is more evident than ever. CAPE, with its dual focus on carbon and biodiversity, offers the perfect platform for deepening our understanding of how to implement these solutions effectively. It not only highlights the importance of these initiatives but also showcases their investability, paving the way for impactful projects that can transform our relationship with nature.” 

 

A new approach to nature-based carbon financing

 

CAPE’s unique approach targets projects that are technically feasible but have yet to reach financial close. Through the provision of transaction advisory services and technical project development support, CAPE will create demonstration cases to show how joint carbon financing and nature-positive ventures can be investable.

 

By integrating carbon credits with biodiversity conservation, CAPE addresses revenue issues in biodiversity projects and offers investors practical guidance on harnessing the potential of nature-based solutions. CAPE is positioned to demonstrate how these models can scale to meet investor demand for high-integrity projects.

Dorothy Maseke, Head of the ANCA Secretariat

“At ANCA, the launch of the Carbon Accelerator Programme for the Environment (CAPE) is a pivotal moment in advancing Africa’s nature-based markets and living to the principles and actions of the ANCA Nature Voices Pledge. CAPE reflects months of consultations with ANCA members and key stakeholders through FSD Africa’s work, aiming to tackle two core challenges: the limited investment flow and the confidence gap in Africa’s nature-based solutions. By partnering with FSD Africa and Finance Earth, we are supporting high-potential projects that struggle to secure full funding. CAPE will make a compelling case for investment in these vital markets, catalysing long-term support for sustainable projects across the continent.” 

 

Building a market for high-integrity projects

 

One of the key features of CAPE is the creation of a “living lab”, where knowledge and best practices will be open sourced for the benefit of the wider market. This will provide a platform for developers to learn from peers who have successfully navigated similar challenges and will include templated guides and resources to help other projects advance towards financial close. By building this ecosystem, CAPE is ensuring that a pipeline of high-integrity nature-based carbon projects can be replicated and scaled.

Richard Speak, Managing Director, Finance Earth

“The launch of CAPE comes at a pivotal moment to mobilise the investment needed to tackle climate change and biodiversity loss across Africa. We are thrilled to partner with FSD Africa and ANCA to deliver CAPE, providing support in the critical phase of the journey to unlocking investment in high-integrity nature-based carbon projects. By working closely with project developers and openly sharing what works, we will not only create individual success stories – we’re aiming to build a community of practice that can accelerate financing for nature, climate and communities across Africa.” 

Expected benefits of CAPE

Accelerated investment – by demonstrating the financial viability of projects that combine carbon credits and biodiversity conservation, CAPE will unlock new flows of capital into unfunded areas.

Increased project integrity – CAPE’s rigorous approach ensures that projects are of high integrity, addressing long-standing challenges in the carbon markets.

Market-building resources – the open-source nature of CAPE’s “living lab” will help replicate success and scale the market for nature-positive carbon projects across the continent.

Landscape of Climate Finance in Africa 2024

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The Landscape of Climate Finance 2024 Report, conducted by the Climate Policy Initiative (CPI) and commissioned by FSD Africa, reveals significant trends in climate finance across the continent. Notably, climate finance flows in Africa grew by 48%, reaching US$44 billion in 2021/2022, up from US$30 billion in 2019/2020. However, this amount still represents only a quarter of the funding necessary to implement Africa’s Nationally Determined Contributions (NDCs) and achieve its climate goals for 2030.

Key Findings of the Report:

  • Domestic Finance: Only 10% of Africa’s total climate finance, equivalent to USD 4.2 billion, originated from domestic actors. Of this, a substantial 75% came from private finance. Given that private domestic assets under management (AUM) were estimated at USD 2.4 trillion in 2020, there is significant potential for growth in this area.
  • Regional Disparities: Climate finance distribution is highly uneven across the continent. The top ten countries account for 50% of total climate finance, while the bottom thirty countries receive just 10%.
  • Investment Trends: Despite climate investments in Africa reaching an all-time high, public finance remains the predominant source of funding. Private finance constitutes only 18% of Africa’s total climate flows, which is markedly lower than in other global regions. This discrepancy is particularly evident in private finance flows, where just ten countries received 76% of the total private climate finance, leaving the remaining countries with only 16%.
  • Concentration of Funding: Half of all private climate finance is directed towards South Africa, Egypt, and Nigeria.
  • Impact of Debt: Countries experiencing debt distress receive significant grants; however, debt still constitutes 36%-43% of their climate finance.

New report finds that climate financing to Africa grew by 48% to US$44 bn in 2021/2022 but still only a quarter of what is required to realise its 2030 goals.

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Washington, USA, 23rd October: A new report on Africa’s climate finance landscape, conducted by Climate Policy Initiative (CPI) and commissioned by FSD Africa, reveals that climate finance flows to Africa grew by 48% to US$44 billion in 2021/2022, up from US$30 billion in 2019/2020. Private sector finance doubled to reach US$8 billion in the same period. Despite this significant growth, current climate finance flows fall far short of what is needed to meet Africa’s climate adaptation and mitigation targets, with potentially serious social and economic consequences.

The report, titled Landscape of Climate Finance in Africa 2024, was launched during a meeting at the Brookings Institution, on the sidelines of the Annual Meetings of the International Monetary Fund and the World Bank Group. It follows CPI and FSD Africa’s first-of-its-kind assessment of climate finance in Africa, released in 2022, which has become a crucial resource for policy, advocacy, and investment decisions across the continent.

The research reveals a significant climate finance gap that threatens Africa’s sustainable development trajectory, with only 23% of the estimated annual funding required to implement Africa’s Nationally Determined Contributions (NDCs) and meet 2030 climate goals being tracked. Key findings include:

  • 90% of total climate finance came from international sources, with only 10% generated domestically.
    • Public sector funding from African governments decreased from US$1.6 billion in 2019/2020 to US$1 billion in 2021/2022.
  • Multilateral Development Finance Institutions (MDBs) provided 43% (US$19 billion) of the total, up from US$11 billion two years earlier.
    • MDBs are the largest providers of climate finance in Africa.
  • Private sector finance, while doubling from US$4 billion to US$8 billion, still accounted for only 18% of the total, a much lower share than in other global regions.
    • Private sector capital mobilized by MDBs declined in Africa, despite increasing in Asia and the Americas.
  • Clean energy finance accounted for US$14 billion, almost a third of the total climate finance, keeping pace with overall growth.
    • However, this rate of growth is insufficient considering Africa’s need for US$200 billion annually to transition to clean energy, as estimated by the International Energy Agency.
  • Multilateral Climate Funds (MCFs) contributed only 2% of the total climate finance in 2021/2022, though these funds are generally more concessional and targeted toward Least Developed Countries (LDCs).

The report also highlights regional disparities, with 10 countries accounting for 50% of Africa’s total climate finance flows. South Africa, Egypt, and Nigeria received more than half of the private flows. The top ten recipients in 2023 were: Egypt, South Africa, Nigeria, Morocco, Ethiopia, Tanzania, Kenya, Côte d’Ivoire, the Democratic Republic of Congo, and Mozambique.

 

Mark Napier, CEO of FSD Africa, stated:

“Climate change poses major risks of unprecedented economic disruption in Africa. To counter this, all actors must invest in a more sustainable future. Climate finance is critical for Africa’s ability to adapt to, mitigate, and develop through a changing climate. This report provides policymakers with a detailed view of the current climate finance landscape and a vision for future development.”

Recommendations for Africa’s Climate Finance Future

The report emphasizes the need to develop domestic capital markets to reduce dependence on international flows, which expose African countries to exchange rate risks. Africa has significant pools of domestic private capital—estimated at over US$2 trillion—in pension funds, insurance companies, and other institutional investment vehicles. Mobilizing this capital could provide African nations with more control over their economic development than relying solely on international finance.

Additionally, the report calls on the private sector and regional, national, and subnational development banks to view climate adaptation as a valuable commercial opportunity. It also highlights the potential of Africa’s green bond markets to mobilize capital for climate-resilient infrastructure projects.

Barbara Buchner, Global Managing Director of CPI, remarked:

“While it’s encouraging to see increased climate finance flows to Africa, the rate of growth is too slow. Public policy and investments must be more effective, and both domestic and international private capital must no longer remain on the sidelines. Otherwise, Africa’s economic opportunities will be overshadowed by significant economic losses and social consequences.”

Click here to download the full report.

Technical Assistance Grant Signing Ceremony with Dhamana Guarantee Company

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UK-KENYA PARTNERSHIP REACHES FURTHER MILESTONE FOR LONG-TERM CLIMATE FINACE SOLUTIONS IN KENYA

  • Investors back Dhamana Guarantee Company’s work to transform East Africa’s financial landscape.
  • Tackling climate change given another boost in Kenya as, for second time in a week, a UK-Government backed investor in green finance solutions puts pen to paper.

Monday 30 September 2024 – the Dhamana Guarantee Company Ltd (Dhamana) has reached a major milestone, marked at an event in Nairobi today.

Investors in the new company put pen to paper at a signing ceremony, which will allow the company to kick-start operations.

Dhamana aims to mobilise private sector finance to support the development of sustainable growth businesses. It will do so by issuing guarantees to commercially viable projects, businesses, and institutions that tackle the climate crisis and make progress towards the Sustainable Development Goals (SDGs).

The design and creation of the company was supported by the UK-Government backed investor the Private Infrastructure Development Group (PIDG) through InfraCo Africa.  With its anchor investment, PIDG kick-started Dhamana, attracting further investment from the African Development Bank (AfDB) and County Pension Fund Financial Services (CPF), with support provided by Cardano Development and FSD Africa.

The project will target businesses that add value to people’s lives, improving the day-to-day life of Kenyans. The increase in affordable finance for Kenyan businesses will mean projects will require less capital to get off the ground, make money, and generate growth. Dhamana will also enable investors to diversify their portfolios, acting as a catalyst to transform East Africa’s financing landscape.

This is the second time in a week that an investor in climate solutions backed by the UK Government has achieved a milestone. Last week, MOBILIST signed a partnership with the Nairobi Securities Exchange, which aims to drive the listing of new investment products in the Kenyan market and increase the amount of private sector capital available for development and climate projects in Kenya and drive growth.

Dhamana CEO, Christopher Olobo, said, “With the support of our investors and supporters, the Private Infrastructure Development Group (PIDG), Cardano Development, FSD Africa, CPF Financial Services, and the African Development Bank (AfDB), we have worked to develop Dhamana as an important catalyst for long-term sustainable finance in the region. Dhamana’s local currency guarantees will connect pools of untapped capital with East Africa’s real economy, making a tangible difference to people’s lives and offering local investors the opportunity to invest in Paris-aligned initiatives.” 

Speaking after the event, PIDG CEO, Philippe Valahu said, “Building on the success of other PIDG-supported credit enhancement facilities in Nigeria and Pakistan, Dhamana will demonstrate the value of such a facility in the East African market, opening up opportunities for investors and clients alike. Crucially, Dhamana will engage new partners and investors in our efforts to urgently address the climate crisis and accelerate delivery of the UN sustainable development goals.”