Joint solutions towards enhancing access to renewable energy financing
Despite numerous efforts done by Tanzania Renewable Energy Association (TAREA) and other developmental projects in Tanzania, renewable energy financing is still a challenge without a concrete solution. Despite financing being the strongest enabler towards the success of any business or sector, joint solution towards unlocking access to renewable energy financing in Tanzania are still lacking the needs to be developed.
Most Renewable Energy (RE) enterprises in Tanzania are at growth stage and need financing to be able to grow and disseminate products and services to the rural communities in Tanzania. Moreover, end-users in rural communities also require financial support to be able to acquire RE products and services, especially for productive use to increase their household income, and to be able to practise sustainable farming.
As of the year 2020, it was estimated that access to electricity was 43% nationwide, with most of the production coming from hydropower which is becoming vulnerable due to the effects of climate change.
The study tour to rural Iringa with financial institutions
Fraxen Consult Ltd. in partnership with TAREA, with financial support from the C.S. Mott Foundation, organized a four-day study tour to rural Iringa. The objective was to explore productive use of Renewable Energy, especially in Agriculture, as an eye-opener to the Commercial Banks to prove that Renewable Energy technologies can make business sense and therefore can be bankable.
Participants to the study tour included financial institutions, i.e. The Cooperative Rural Development Bank (CRDB), EQUITY Bank, Mwalimu Commercial Bank (MCB), National Bank of Commerce (NBC), and TIB Development Bank. The visit also included Renewable Energy consultants, Elico Foundation and the SAGCOT Centre.
Another objective of the study tour was to create awareness to the commercial banks on the potentials and viability of financing productive use of Renewable Energy, to prove the concept to the commercial banks that Renewable Energy loans can be repaid from productive use initiatives and finally to bridge knowledge gap and enhance participatory dialogue on the upcoming roundtable discussion.
The Roundtable Discussion with Renewable Energy stakeholders
The roundtable discussion was a follow-up event after the learning visit, which brought together financial institutions, Renewable Energy enterprises, Ministry of Energy, Ministry of Finance, Rural Energy Authority (REA), Renewable Energy Ecosystem partners and other stakeholders, aiming to dialogue on how to unlock Renewable Energy financing to benefit the rural and off-grid communities.
Among others, the meeting discussed on how to increase the flow of financing for productive use of renewable energy solutions, in on- and off-grid communities; through financial institutions support and learning from others on financial solutions productive use of renewable energy, i.e. India and Kenya and finally identify joint solutions towards enhancing access to Renewable Energy financing.
Speaking at the meeting, the CRDB specialist on Green Finance, Mr. Hailo Kibiki admitted that currently, the bank does not have specific products for renewable energy, although the bank lends to large and medium businesses. He did however add the following;
“We are ready to lend, but we need more dialogue with renewable energy stakeholders to see the best way forward. The industry is growing fast and it is promising. The bank also sees the positive impact especially for the off-grid communities the way they run their economic activities by using solar energy, which will reduce defaulters.”
Lessons learnt and deliberations
The study tour had created awareness and interest to Financial Institutions (FI) to venture into Renewable Energy (RE) financing but lack the relevant information. It further reveals need for more dialogues, trainings and workshops among stakeholders including financial institutes. These extra events and meetings could bridge the present information gap and create more opportunities. More partnerships between FI and RE-Enterprises will strike a mutual benefit. Trust among actors will be created through partnerships and provide assistance in co-creation of products that respond to the market demand with risks mitigations measures.
Co-designing de-risking mechanisms to reduce risks will build confidence to financial institutions and stimulate more lending to RE projects/businesses at affordable rate. The sector holds a lot of potentials, such as developing an online platform for information sharing on Power Usage Effectiveness (PUE), available RE products, cost and benefits, and available Financing could act as a game changer!
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