Rwanda’s BRD Sustainability Linked Bonds Showcased as Model for Energy Access Financing at Africa Energy Leadership Summit

By Ange de la Victoire DUSABEMUNGU

Africa continues to grapple with challenges hindering the widespread adoption of electricity and solar energy, primarily stemming from financial constraints. However, financial experts and project planners emphasize the importance of African countries taking a proactive role in finding solutions. By leveraging domestic resources, tapping into the expertise of the African diaspora, fostering innovation, and investing in the upskilling of the workforce, progress can be made.

Moreover, women’s participation in shaping energy access policy in Africa is crucial since they are mostly affected by the lack of energy for domestic use or other purposes, according to experts at a recent panel discussion on financing energy access in Africa.

Experts said that Innovative financing models such as green bonds, climate funds, and blended finance are needed to drive investment in the sector.

Leveraging energy technology like solar, wind, bioenergy, and smart grid solutions is also essential. Additionally, local capacity building is key to ensuring that everyone is trained and educated on how to address the challenges in the energy sector.

At the Africa Energy Leadership Summit held in Kigali from November 4th to 6th, 2024, Angelique Kantengwa, Managing Director of BDO Corporate Advisory, highlighted the Development Bank of Rwanda (BRD) Sustainability Linked Bonds as a successful local solution that could be replicated by other African countries to tackle challenges related to energy access financing. Rwanda has achieved an energy access rate of over 80% as of 2024.

“We need to have more women acting, so participating as actors to really shape the policy. In terms of funding, financing, and investment, we need to use more innovative financing models like green bonds, climate funds, and blended finance,” she stated during a panel discussing Financing Energy Access in Africa.

The BRD’s sustainability bond, which was fully subscribed and set to mature in seven years, is part of a broader $124 million medium-term loan program. The bond aims to mainstream green finance in Rwanda, aligning with the government’s sustainable economic development objectives. It received credit enhancement support from the World Bank, further boosting its credibility and appeal.

Kantengwa highlighted the importance of capacity building in this transition, noting, “Capacity building is key to have everybody trained, educated, and understand exactly what the challenge is and how to face it.”

This education will empower local communities to engage with and benefit from sustainable financing initiatives.

Kweku Awotwi, Chairman at United Bank of Africa, Ghana, also expressed support for these financing instruments, recognizing the pivotal role banks must play in the energy transition.

“The opportunity to do green bonds and blended financing is one very powerful way to assist organizations that have second and third-order emissions,” he observed.

He pointed out that even organizations not directly involved in energy production can contribute to reducing emissions through sustainable practices.

Kantengwa reiterated the potential of local financing, stating, “Raising locally on a longer term will be very stable, easy to manage, easy to control, and repayable when everybody takes part in the effort.”

She highlighted the successful Agaciro Development Fund as an example of mobilizing diaspora money for local projects.

Awotwi complemented Kantengwa’s vision by referencing the successful diaspora funding in Ethiopia for a massive hydroelectric dam project. He remarked, “The government has to provide some guarantees in that respect, and I think their role is very important in such projects.”

He emphasized the critical need to harness remittances as a key financial inflow for sustainable development across Africa.

Africa is the world’s most energy-deficient continent, with 600 million people, or 43% of the population, lacking access to electricity. Most of these people live in sub-Saharan Africa.

According to the World Bank, Eastern and Southern Africa accounts for more than half of the world’s unelectrified population (675 million) and nearly a quarter of the global population without access to clean cooking (2.4 billion). Accelerating energy access progress in the region is essential not only to help unlock its potential and deliver on its development goals, but also to help the world achieve SDG7 (and other SDG goals) and address global challenges including climate change, resilience, and fragility.