Country: Ethiopia

Islamic finance toolkit

The Islamic finance industry has expanded rapidly over the past decade where its total assets reached over $2.1 trillion in 2018, spreading across dozens of countries and covering primarily Islamic banking, capital markets, and insurance sectors.

Islamic finance has also been integrated within the global financial system as a universal alternative financial proposition appealing to Muslims and Non-Muslims alike. In fact, many international financial hubs including London, Hong Kong, and Luxembourg, have created enabling environments for Islamic finance to thrive in their jurisdictions and issued sovereign Sukuk (Islamic bonds) to further support their Islamic finance infrastructure.

However, despite having great potential in the continent, the Islamic finance industry in Africa remains relatively underdeveloped where its share of the industry’s total assets is around 1% in spite of Africa being home to 27% of the world’s Muslim population. Similarly, Africa accounted for only 2.2% of global Sukuk issuances between 2001 – 2017, showing the underdevelopment of Islamic capital markets in the continent and signifying the untapped potential of Sukuk in the region.

In an attempt to address the aforementioned challenge, we sponsored the development of this Islamic Finance Toolkit by Islamic Finance Advisory & Assurance Services (IFAAS) for the benefit of the African policymakers and regulators to demystify the key founding principles, structures, and products of Islamic finance, shed light on the industry potential in Africa, and how Islamic finance could be used to achieve the key strategic development objectives of African governments.

DMAC Toolkit: Unleashing the power of data to transform your business

With more data being created at a faster rate than ever before, it can be hard for financial service providers (FSPs) to know what to do with the plethora of data available to them. FSPs are capturing large amounts of data on their internal systems and also have access to external data – as a result of improved connectivity and increasing smartphone penetration, as well as through publicly available external data (e.g. national surveys).

However, many FSPs are not making full use of this data as they may not understand its full potential, have information overload, inefficient processes and systems, and think it is expensive to make use of data. The toolkit aims to help FSPs understand the different data sources available to them and how to use them effectively to transform their business.

Although primarily aimed at FSPs, the toolkit may also be of use and interest to those who provide services to FSPs in their respective markets (such as data management and research firms) and other organisations wanting to implement programmes that encourage FSPs to make more and better use of data.

The toolkit draws on the valuable learning gained through the Data Management and Analytics Capabilities (DMAC) programme that uses data-driven evidence to help FSPs in sub-Saharan Africa to design inclusive and affordable financial products and services that respond to the needs of unserved and under-served adults, with a particular focus on women and youth.

Sustainable economic development in Africa depends on long-term finance

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Long-term finance is vital to driving Africa’s economic growth and development. Africa currently faces significant long-term finance gaps in the real and social sectors. FSD Africa estimates that the funding gap for SMEs, infrastructure, housing and agribusiness is over USD 300bn per year that is currently not being met.

Significant strides have been made during the past decade to enhance financial inclusion across Africa. These improvements in the outreach of financial markets were made possible due to the rapid uptake of digital financial services. The use of new delivery modes, such as agent banking and mobile phones, to send and receive payments has completely reformed the financial sector’s outreach to remote, previously excluded users. While still more at the experimental stage, digital platforms increasingly enable the provision of financial services relating to savings, credit and insurance.

However, although inclusion of a large segment of the population as senders and recipients of dal payments certainly serves to empower a previously marginalized segment of the population, it does little to promulgate the core function of financial markets. The purpose of financial intermediation is to enhance the economy’s productive potential by facilitating more optimal allocation of scarce resources. Channeling capital to the most needed uses will contribute to meeting investors risk/return objectives while also augmenting the growth potential of African economies.

When compared to the ‘inclusion revolution’ of the last 10-20 years, progress in enhancing access to investment finance resulting in greater productive employment has been disappointing. Increasing the availability of long-term finance will support investments in the housing, infrastructure and enterprise sectors thereby, directly creating job opportunities. In addition, such investment in social and real sector projects will enhance productivity, and thereby contribute to poverty alleviation through potential sustained increases iosable incomes.

One of the key challenges faced by investors has been the lack of good quality information and information asymmetry on long-term finance. Enhancing domestic capacity in the provision of long-term finance is crucial to filling the sizeable long-term financing gaps that apply almost universally to the African infrastructure, housing and enterprise sectors. Only by harnessing the contribution of long-term finance made available by the private sector will African countries effectively leverage the limited resources made available by the public sector and by donors. Often, African policymakers are confronted with challenges in balancing large and invariably well-justified expenditure demands with very limited fiscal resources, and as a result governments resort to domestic security issuance to fund their current expenditures.

As investors find it more attractive to put their money in ‘risk-free’ government-issued securities, increased issuance of such securities reduces the willingness of loinvestors (banks and institutional investors) to take part in funding risky productive investments. In order to stem this ‘crowding out’ of risk-capital by the government, a concerted effort is required to strengthen management of fiscal resources; to better utilize existing sources of long-term funding, as provided by banks and institutional investors; as well as to develop new sources of domestic funding. Over time capital market financing may come to play a larger role in filling the financing gap that exists in developing economies, provided the approach adopted is appropriately tailored to the development challenges faced by small, underdeveloped markets.

In conclusion, the objective of promoting sustainable economic growth and job creation through greater provision of long-term finance is crucial for Africa and its people. It is imperative that decision-makers, both policymakers, investors, development finance institutions as well as development partners embrace measures that will enhance productivvestment in support of Africa’s economic development.

The Long-Term Finance Initiative

We have collaborated with the German Development Cooperation (GIZ), African Development Bank (AfDB) and the Centre for Affordable Housing Finance (CAHF) to support the Long-Term Finance Initiative, which has two main interventions:

  1. The Long-Term Finance Scoreboard:

The purpose of the Scoreboard is to assemble information about the sources and uses of long-term finance in Africa – whether provided by governments, donors, foreign direct investors or the domestic private sector. Previously, information and data on the availability of long-term finance in Africa has been scarce, spread across numerous sources, or simply unavailable. Thus, the intention of the long-term finance initiative is both to bring together existing sources of information as assembled by third parties and to augment the availability of data as regards long-term finance through collection of primary data. The Scoreboard also provides bench-marking that will facilitate comparison of how countries are performing vis-à-vis one another, thereby engendering interest and applying peer pressure among countryakeholders.

The purpose of the Scoreboard is to provide information to policy makers, private investors – both domestic and foreign investors – and development partners to support their decision-making as regards investments in Africa. The pilot website currently under development will be published in the coming months with a view to soliciting feedback and enhancing the scope and quality information provided.

Link to the live and online scoreboard: http://afr-ltf.com

  1. In-country diagnostics:

The purpose of in-country diagnostics is to identify effective ways to deepen local markets for long-term finance. By mobilizing local, private sources of finance and more effectively leveraging funding provided by the public sector, African economies will gradually be able to reduce reliance on donor funding and foreign direct investment. The diagnostic framework is based on a comprehensive approach to long-term finance that ranges from contributions of governments, donors, and private sector funding, whether provided by local or foreign investors, to funding intermediated by banks and capital markets, and other sources of private finance, such as private equity or venture capital.

The intention is that country diagnostics will inform country reform programs and create momentum for dialogue among key public and private sector stakeholders, thereby enhancing the focus and effectiveness of implementation efforts.,

Value for money approach for the FSD network

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Financial Sector Deepening programmes (FSDs) face increasing pressure to show that they provide value for money (VfM). This includes demonstrating that they are delivering their interventions efficiently and achieving their desired development impact. To achieve this, strengthening of internal procurement processes, as well as monitoring and results measurement (MRM) approaches, continue to be key areas of focus.

With these objectives in mind, FSD Africa commissioned the development of a new VfM approach, as a resource for the FSD Network – a group of FSD programmes including eight national programmes in Ethiopia, Kenya, Mozambique, Nigeria, Rwanda, Tanzania, Uganda, and Zambia and two regional programmes (FinMark Trust in Southern Africa, and FSD Africa).

The approach was developed by Oxford Policy Management (OPM) and Julian King & Associates, building on OPM’s approach to assessing VFM. This approach treats VfM as an evaluative question about how well resources are being used, and whether the resource use is justified. Addressing an evaluative question requires more than just indicators – it requires judgements to be made, supported by evidence and logical argument.

The VfM approach emphasises evaluative reasoning as a way to make robust judgements, transparently and on an agreed basis. It involves developing definitions of good performance and VfM, which are agreed in advance of the VfM assessment. The definitions include criteria (aspects of performance) and standards (levels of performance) developed specifically for the FSD context. Criteria and standards provide a systematic framework to ensure the VfM assessment is aligned with an FSD programme’s theory of change, collects and analyses the right evidence, draws sound conclusions, and tells a clear performance story.

FSD programmes are complex and their performance depends not just on quantitative indicators of delivery (such as number of projects completed) but also on the quality of implementation (e.g. sound adaptive management to respond to a changing environment and to act on emergent opportunities and learning). A mix of evidence is necessary to support well-informed, nuanced judgements about FSD performance and VfM.

Indicators play an important role in measuring some aspects of FSD performance. But restricting a VfM assessment to indicators alone would run the risk of missing important information about the quality of delivery and outcomes – for example, focusing on aspects of performance that are easy to measure at the expense of aspects that are important but difficult to quantify.

Therefore, the new VfM approach accommodates a mix of indicators and narrative evidence. The approach seeks to maximise use of rigorous evidence from existing MRM frameworks. It is aligned with the FSD Network’s MRM frameworncluding  Impact-Oriented Measurement  (IOM) Guidance (on how FSDs can better measure their contributions to changes in the financial markets they seek to influence), and the FSD Compendium of Indicators (setting out a common theory of change and related measurement framework that form the basis of common indicators to track FSD outcomes and impact).

The VfM approach is designed to support accountability as well as reflection, learning and performance improvement across the FSD network. It can also be used to systematically identify areas where MRM systems can be improved, to provide better evidence and benchmarking of sound resource management, delivery, outcomes and impacts.

The VfM approach is detailed in our new VfM Framework and Guide. The VfM Framework explains the conceptual design and rationale for the approach. The Guide sets out a practical, user-friendly, step-by-step approach for design, assessment and reporting on VfM. These documents will support a consistent approach to VfM assessment and reporting across the FSD Network, while retaining sufficient flexibility to reflect differences in context.

These frameworks have undergone rigorous development and testing over the past 18 months. As detailed within the documents, this has included a consultative process with FSDs and donor agencies, a staged approach to framework development with input from all FSDs, a full-day workshop with FSD MRM teams (at the FSD Conference in Livingstone, Zambia, November 2017), and piloting of the approach during 2018 with FSD Moçambique, FSD Uganda, Access to Finance Rwanda, and FSD Africa.

It is hoped that FSDs will use this comprehensive VfM assessment approach to support accountability, learning, improvement, and making investment decisions. The FSD MRM Working Group serves as an ideal community of practice to support effective and consistent application of the approach.

Using development capital to finance sustainable growth in Africa

Posted on by TIMOTHYRADIER

There is much talk lately about blended finance, the use of capital from public or philanthropic sources to increase private sector investment for sustainable development. I was on a panel earlier this year when one of the speakers described it as ‘the trampoline that can give you the bounce needed to launch.’

Smart deployment of blended finance not only provides early capital to sustainable solution but can guarantee long-term financing by attracting private and institutional investors.

FSD Africa Investment’s form of blended finance, development capital, is designed to invest in untested, breakthrough ideas that we believe can have a transformative impact on the continent’s sustainable growth. Our investment works to take early stage risk, allowing other sources of risk capital to invest in high-impact financial sector intermediaries and business, alongside us. Why is this important?

Africa needs investment capital with different risk/return profiles

Reaching the S require private and institutional capital to invest in structures that achieve development outcomes in a financially sustainable way.

We invest in high-potential businesses that are often deemed too risky for commercial investment.  The ‘trampoline effect’ makes it easier for commercial capital to flow to ventures that now match their risk/return profiles.  For example, our investment in <a”https://fsdafrica.org/programme/mfs-africa/”>MFS Africa, a remittance payments provider, enabled them to close their Series B round, and grow to raise capital in future funding rounds.

African SMEs need early stage risk capital

For investors seeking returns, Africa is a continent of opportunity, but also high risk.  Medium and SMEs account for 90%1 of Africa’s businesses and contribute to 40% of GDP, as well as creating 80% of the continent’s employment. The reality, however, is that the majority of African SMEs are in the early stages of their development, with investment needs between USD 50,000 and USD 500,000, but struggling to access capital to expand and grow into larger and more sustainable companies as they are deemed to high risk.

Our mandate is to change this perception, by testing new and alternative financing structures that can make investing in Africa’s SMEs more attractive to investors.

Africa needs investments in businesses that will increase access to basic services

The majority of people in Afrnot have access to affordable health services, opportunities to save for old age, safe water and clean energy or housing. With a projected population of 2.4 billion by 2050, the need has already surpassed the ability of governments and development finance institutions to address this crisis.

FSD Africa Investments development capital is critical to engaging the private sector, as well as institutional and impact investors, to fund businesses and products that can expand access to basic services for everyone. For example, we are already investing in an affordable housing finance company and a micro-pensions start-up.

Africa needs more private sector solutions for climate change

Millions of vulnerable people are falling into poverty as a direct consequence of climate change. Extreme climate conditions are affecting livelihoods – with loss of property, income, access to clean water and a safe environment. Trillions of dollars of investment are needed to combat climate change. We need to move quickly towards renewables, sustainable agriculture and energy efficiency.

We deploy development capital to mobilize financial resources into financial platforms and solutions to mitigate the causes of climate change and to adapt to its effects, reducing its impact.

Africa’s needs to harness its own sources of capital

Foreign Direct Investments to Africa have been on a downward trend over the last five years, falling from USD 74 billion in 2013 to 42 billion in 2017. Yet, Africa has large pools of its own capital through savings, insurance, pensions contributions but very little of thisoney finds its way back to the real sector or into alternative asset classes, such as private equity funds.  Finding investment platforms that use blended finance structures to manage the risk/return profiles would support a better allocation of this capital to the real economy.

Unlike many development finance institutions, we have a primary mandate to drive impact, which is secondary to the need to create return on our investments. We invest in order to drive impact and create solutions to the most pressing challenges facing Africa’s financial markets.

By stimulating and increasing the flow of commercial and institutional capital into financial firms and funds, we’re ensuring that Africa’s financial sector can serve its local communities and economies in the long-term, reducing the need for development funding in the future.

 

<cite”blockquote-source”>1The Challenges and Opportunities of SME financing in Africa, London Stock Exchange Group,

Empowering women through savings groups

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“Our economies are built on the back of women’s unpaid labour at home”

– Melinda Gates

Empowering women means, at its core, providing women with strength and confidence to control their lives, and knowledge of their own rights so that they can actively engage in their communities.

Increasing women’s access to financial services allows them to have better control over financial resources and improves independence and mobility. It also fosters greater investments in income-generating activities, and the ability to make decisions that serve the needs of women and their families. In short – financial inclusion empowers women.

But how do women, especially those living in rural areas, access financial services?

Savings groups (SGs) and access to finance

SGs are easily accessible groups of people who get together regularly to save money and borrow from the group savings, if needed, according to rules established by the group.

Programmes that promote SGs typically focus on women’s economic empowerment and measure change through quantitative indicators of economic well-being. This is mainly because SGs enable the accumulation of funds which can be used as capital for micro-enterprises and for such programmes, the quantification of results is easier. This approach, however, provides a limited understanding of the role of SGs in affecting various dimensions of women’s empowerment, such as social, political and reproductive empowerment.

The SEEP network, in partnership with FSD Africa and Nathan Associates, commissioned a savings group research across sub Saharan Africa. The aim of the research was to highlight good practices in the design and monitoring of Savings Group programmes for women’s empowerment outcomes. The research also led to the development of a monitoring tool for the measurement of the various dimensions of women’s empowerment within SGs.

Savings groups and women’s empowerment

The research built upon pre-existing frameworks and for the first time captured women’s empowerment in the specific context of SGs.

In particular, seven ‘domains’ or clusters of core areas within which empowerment can be measured have been identified. These are i) Economic independence; ii) Confidence and self-worth; iii) Decision-making; iv) Voice and leadership; v) Time use; vi) Mobility; vii) Health.

Through these domains, SGs market actors can design SGs interventions with sight of the empowerment impacts they aim to achieve. They can also observe the likelihood of empowerment outcomes and impacts across different SGs intervention types:

i) Savings Groups only interventions, for example, a development institution working on financial inclusion could adopt an SGs only approach to enable target groups to access appropriate financial services from formal financial institutions. For these kinds of interventions, empowerment impacts are strongly observed in 2 out of the 7 domains, economic independence and confidence and self-worth. Through this type of intervention, it was observed that participants gained access to appropriate financial services, enhanced financial management skills, expanded social and support networks. Fewer impacts on mobility, time-use and health were observed.

ii) Savings Groups in combination with other economic development activities, for example, a Savings Group initiative could be combined with financial education, technical or vocational training, or specific income generating activities. Strong empowerment impacts are observed for such interventions for 3 out of the 7 domains, that is, economic independence, confidence and self-worth and decision-making. Improved decision-making is observed through participants engaging in employment or self-employment and demonstrating abilities in influencing relevant decisions in their homes and communities.

iii) Savings Groups within other integrated programming i.e. programming that is aimed at weeding out harmful social norms & inequalities: for example, a Savings Group initiative could be integrated with gender programming that challenges harmful social norms such as domestic violence, female genital mutilation, negative attitudes to family planning/reproductive health, etc. The programming approach could combine SGs with education and capacity building for members accompanied by gender dialogue sessions, engaging members and their spouses, community and religious leaders.

For such interventions, impacts are strongly observed within 5 of the 7 domains: economic independence, confidence and self-worth, decision-making, voice and leadership and health. Empowerment demonstrated by leadership is observed through changes in gender norms, especially within women’s economic participation; empowerment in health through increased and improved investments in maternal, neonatal and child health or improved attitudes and norms with respect to reproductive and sexual rights. For empowerment demonstrated by time use, impacts are observed through more equitable allocation of unpaid household labour.

An example of an impactful SGs within an integrated programming intervention (i.e. intervention option iii), is the ‘Towards Economic and Sexual Reproductive Health Outcomes for Adolescent’ girls (TESFA) project under CARE International in Ethiopia. Girls within SGs provided with sexual and reproductive health (SRH) training demonstrated both economic and health related gains from programme participation. These were observed through, increased SRH knowledge, improved communication on SRH, decreased levels of gender-based violence, improved mental health, increased social support and gender attitudes.

A systematic approach to analyzing women’s empowerment

Saving Groups create economic independence for women but in order to analyze their contribution to other domains of empowerment, there is need for a systematic design of a monitoring and results measurement approach. Through this research, a toolkit that provides guidelines as to how to create an evidence-based theory of change was developed. Drawing from existing frameworks economic empowerment and existing data, the toolkit proposes a more holistic framework for SGs, based on the seven domains of empowerment discussed above. It also provides some standardized indicators to improve the comparability and aggregation of results across projects and organizations.

For more information and application of the WEE toolkit click here.

 

CAHF 2019 housing finance in Africa yearbook (10th edition)

Our partner, the Centre for Affordable Housing Finance has launched the 10th Edition of its Housing in Finance Yearbook, which now contains 55 country and five regional profiles.

Targeting housing finance practitioners, investors, developers, researchers and government officials, the 2019 Yearbook provides an up-to-date review of practice and developments in housing finance and delivery in Africa, reflecting the dynamic change and growth evident in the market of each country over the past year.

The intention of this publication is to build a community of practice of housing finance experts in-country. Throughout its ten-year span, the Yearbook has retained a focus on the lower end of the market. What makes this publication unique is its overt emphasis on affordable housing. The profiles focus on the critical need for housing and housing finance solutions that are explicitly targeted at the income profiles of the majority of the population, for whom most commercially-developed residential property is out of reach.

Download the yearbook here.

Central bank digital currency: friend or foe of mobile money in sub-Saharan Africa?

Posted on by TIMOTHYRADIER

Many claim that Central Bank Digital Currency (CBDC), formally known as Digital Fiat Currency, can have many benefits for financial inclusion and has the potential to impact mobile money. But can CBDC overcome the challenges that current mobile money providers and consumers face?

First things first; what is “Central Bank Digital Currency”. Simply put, CBDC is a digital representation of physical cash. As its digital alternative, CBDC is interchangeable with physical cash on a one-to-one basis as valid legal tender, and adopts all three of cash’s key features: a unit of account; a store of value; and a universally accepted means of exchange between transacting parties. The distinction between CBDC and private cryptocurrencies are summarised below.

Figure 1. Digital Fiat Currency compared to Private Cryptocurrencies

Source: Cenfri, 2018

So, what’s the relevance of CBDC to financial inclusion?

CBDC has the potential to digitise the entire payments value chain, from the first to the last mile in a more cost-effective and efficient way. Cenfri’s 2018 report “The benefits and potential risks of digital fiat currencies” finds that CBDC, unlike cryptocurrencies, can promote adoption through network effects because of the key features that is shares with cash. CBDC’s speed, efficiency and safety (being backed by the Central Bank) introduces much needed trust in digital payment mechanism, something that is lacking in private cryptocurrencies and mobile money. And trust is critical where money is involved. Trust means that CBDC could eventually be adopted along the entire value chain (like cash) and hence could promote financial inclusion at all levels of society.

But what about mobile money specifically?

Mobile money may be a leader in “banking the unbanked” but the phenomenon still faces obstacles that undermine its uptake and use, as shown in the figure below.

Figure 2. Key supply and demand cost drivers of mobile money in SSA

Source: Cenfri 2019, based on data from various literature sources

The application of retail CBDC to mobile money can foster greaterinteroperability, improve payment efficiency, facilitate cost-saving gains and reduce key payment risks typically associated with mobile money. CBDC can also enable trust in mobile financial services due to its safety and the way in which its speed eases liquidity constraints of mobile-money agents. CBDC also eliminates the need for unnecessary third-party intermediaries and so streamlines payment clearance at the same time as enabling true interoperability.

How about the downsides of CBDC?

If CBDC is not implemented appropriately it could exacerbate contextual inequalities along the lines of digital, financial and economic disparities between population segments and also intensify the complexity of mobile money. For example, if not everyone has a mobile phone then only those that do can access CBDC; and if only certain areas have network coverage then only those in those areas can access CBDC; and so on. CBDC could threaten the intermediation role of traditional deposit-taking. CBDC could also exacerbate poor uptake of mobile money (e.g. due to illiteracy) simply because of CBDC’s (perceived) complexity. If everywhere you can only pay in CBDC then it may make the gap between illiterate and literate users even wider. The more vulnerable segments of the population, as primary unstructured supplementary service data (USSD) customers, could also be at greatest risk of identity fraud.

So what can be done to avoid these risks?

CBDC can bring maximum benefits to mobile money and financial inclusion if it meets certain pre-conditions. The basic principles to avoid these risks lie with governments and the enabling financial environment they create in their respective countries. Governments need to ensure appropriate and effective legislation and anti-money laundering and combatting the financing of terrorism regulation, as well as the implementation of robust consumer protection laws and national cyber-security defences. We know that that some developing economies lack these key laws – or lack the ability to uphold the legislation, even if it does exist. Through our Risk, Remittances and Integrity Programme, FSD Africa is partnering with Cenfri to combat these challenges by helping countries implement appropriate regulation that enables low-cost, efficient, domestic and cross-border payments to enable inclusive financial systems to operate at scale, and positively impact broader economic development.

It’s clear mobile money presents a significant use case for CBDC in the drive towards financial inclusion, but not without risks. If governments, supported by development partners, address these concerns, the impact of CBDC on mobile money could not only be positive, but could also contribute to significantly greater financial inclusion and better economic integration altogether.

You can delve deeper into the role of CBDC in delivering financial services to the unbanked and CBDC’s applicability to mobile money by downloading Cenfri’s latest report “Central Bank Digital Currency and its use cases for financial inclusion; a case for mobile money”. 

How green bonds can fund development

Posted on by TIMOTHYRADIER

Opinion article originally published on Devex.

One of climate change’s great injustices is that the worst affected countries are the ones that have contributed least to the problem.

In 2015, the world coalesced behind the Paris Agreement on climate change in an effort to transition to a low carbon future. And while much attention has been on the United States’ decision to withdraw from the agreement, many African governments have been stepping up.

Following the African Union’s lead, Ghana, Ethiopia, and Kenya, among others, have all factored climate change into their national development plans. And it is easy to see why these African nations are approaching climate change with earnest given the danger climate change presents to the continent. Cyclone Idai, for example, left incalculable destruction across three countries last month, an unfortunate reminder of the devastation climate change could have on the continent.

Trillions of dollars of investment are needed to combat climate change. And while the Paris Agreement does have funding mechanisms to support developing countries, these funds can only go so far.

Moreover, unlike the world’s primary greenhouse gas emitters, developing countries in sub-Saharan Africa need to encourage growth without fueling emissions.

Take electricity: Sustainable Development Goal 7 states that everyone should have access to affordable and reliable electricity by 2030. Yet, in a region where more than half the population still does not have access, governments need to improve access and reliability without turning to high-emitting power sources such as coal.

The role of green bonds

A solution to the crisis may lie in green bonds, which allow issuers to raise money specifically for environmentally friendly projects, such as renewable energy or clean transport.

This year, analysts predict the green bonds market will grow to $200 billion, a 20% increase from last year and a significant jump from 2016, which saw $87 billion raised. But while the global market continues to grow, there are fewer bonds available across Africa.

Most of Africa’s green bonds have been issued by the African Development Bank, which has raised over $1.5 billion since 2013. While Nigeria issued a $29.7 million bond to fund solar energy and forestry projects in December 2017, no other countries have followed suit.

African governments have historically relied on development finance institutions to fund green projects such as irrigation initiatives and solar energy. However, this is unsustainable and ignores potential capital that could be raised from pension funds, the diaspora, and the middle class. For example, Kenya’s pension sector is valued at about 1.2 trillion Kenyan shilling, or $11.9 billion.

If national governments want to unlock more capital, structures are needed to give investors the confidence to invest.

Kenya, Nigeria, and South Africa are leading the charge in sub-Saharan Africa. Since 2017, these countries have been working with a range of partners, including FSD Africa, to develop a robust framework for the issuance and listing of green bonds. Now, Nigeria and Kenya have joined India, China, and Indonesia in turning their frameworks into official guidelines — and the market is responding.

Last month, the Nigerian-based Access Bank issued Africa’s first certified corporate green bond, unlocking $41 million to protect Eko Atlantic City, near Lagos, from rising sea levels. This bond will also support a solar energy project. Notably, the bond was fully subscribed, highlighting the fact that if the frameworks are built, investors will come.

While development finance will always play a critical role in supporting development on the continent, countries are recognizing they need to unlock funding from other areas. Kenya and Nigeria have heard this call and global markets have responded. This should give other countries confidence to follow suit.

Given the nascent nature of capital markets in Africa, we have the unique opportunity to build them from the ground up and respond to pressing priorities including climate finance. This is particularly critical as governments start to pursue infrastructure development at a larger scale.

Green bonds may still be a small piece of the global bond market, but they are showing real potential for helping developing countries move to greener, more equal economies.

A place to call my own: the significance of housing for women

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Nearly one in four households in Africa are headed by women, reaching 41% in Zimbabwe, 36% in Kenya and 35% in Liberia according to the World Bank. Female-headed households have been increasing across all countries, globally. So, as well as considering the broader challenges and opportunities affordable housing creates for everyone, we should also ask: what’s the significance of housing specifically for women?

The consequences of good housing are far-reaching: the quality of housing impacts on its residents’ health and safety, their ability to function as productive members of society, and their sense of well-being in their community. Good housing contributes to good health outcomes, provides protection from the elements and supports a family’s needs throughout its life cycle.  These factors have a particular impact on women. In many low-income households across Africa, whether in rural areas or in the cities, the home is still the woman’s domain.  The quality of the living environment impacts partn her day-to-day experiences and capacities to meet the needs of all who depend upon her. It is for this reason that we know that women are especially keen on home improvements and often the drivers of such initiatives within their households.

Increasingly, and especially in high-unemployment contexts, the income-earning potential of housing is also being recognised. Many women identify entrepreneurial opportunities through their housing, using their homes as their business premises, running a shop on site, or working remotely. Some are renting out one or two rooms, or a structure in the backyard (see our video interviews with two female clients of Sofala’s i-build home loans project) contributing to household income. Recent research finds that poverty falls faster, and living standards rise faster, in female-headed households.

A home and its surroundings also affect a woman’s identity and self-respect. This social dimension, while less tangible, is nevertheless hugely significant. A home offers long- and short-term security for women as household members, especially those that are unmarried. Secure housing provides safe shelter and protection from homelessness after divorce, widowhood, job loss or other challenging circumstances. A key development worth noting has been that all government subsidised homes in South Africa are now registered in the names of both spouses. In short, a secure home enables more choices and more individual freedom. Having “a place to call my own” makes it possible for a woman to run her own household, that is, to become the head of the household, providing a degree of security to ride out and rebound from life’s uncertainties, such as temporary unemployment or illness.

Another impspect of home ownership is access to collateral, which enables women to access financial services and accelerate their earning potential. A savings account in a woman’s name offers a form of security and independence: a safe place to store and protect earnings. Women make better borrowers because they know that their ability to improve the home in the future depends on the reputation they develop in managing a particular loan. Women are therefore a very important part of the housing solution, and should be understood as such, by policy makers, project implementers, and service providers. In cases where women do not have title deeds for their home, banks are revolutionising the way they lend for home construction. For example, in Kenya – a country with a population of 50 million, but less than 30,000 mortgages – the Kenya Women Microfinance Bank (KWFT) has created a new loan product called “Nyumba Smart” (“smart home”). Using flexible collateral, the loans provide female customers with up to $10,000, repayable over three years, for the construction of all or part of a house.

Despite this progress, over 300 million women live in African countries where cultural norms prevent equal property rights, even when there are formal, equitable property laws ouragingly, innovative technology-based tools are helping to overcome this barrier. For example, the social enterprise, Map Kibera is working on an open-source mapping platform for Nairobi’s largest slum. The objective is to give inhabitants an informal claim to their land, to lobby for services and to act as “evidence” in negotiations with municipal governments, which may otherwise bulldoze settlements with no legal title without warning.

At FSD Africa, we believe housing plays a crucial role in economic development and poverty reduction, not least for women. That is why we have partnered with the “http://housingfinanceafrica.org/”>Centre for Affordable Housing Finance in Africa (CAHF) to promote investment in affordable housing and housing finance across Africa; we have also invested in Sofala Capital, which includes Zambian Home Loans Limited and iBuild Home Loans Pty Limited as part of its group of companies.  By strengthening Sofala’s balance sheet, we are enabling these companies to achieve scale with their innovative housing finance product offerin