Small and medium companies operating in the energy sector have got a new boost that can allow them borrow money to finance their projects with confidence.
The Swedish International Development Cooperation Agency (SIDA) and the Development Bank of Rwanda (BRD) have signed two Energy Portfolio Guarantee agreements relating to the bank lending facilities.
The $40 Million will serve as a guarantee for direct and on-lending which will allow access to finance small and medium-sized private enterprises in a move to provide affordable and clean energy.
The Guarantee shall be directed towards loans to the renewable energy sub-sector, and towards end users of renewable energy solutions, such as households and micro businesses.
The biggest component is made of on-lending guarantee facility worth USD 30,000,000, a sum which is meant to cover Financial Institutions.
The objective of this amount is to increase lending by Financial Institutions to Small and Medium Enterprises (MSMEs) in the Renewable Energy sector in Rwanda.
Sida believes that this will improve both the conditions and the quantity of qualifying loans, and thus, stimulate electrification and economic growth in Rwanda.
“Sweden will additionally help the borrowers in the renewable energy sector, which often lack the collateral demanded to access financing. This intervention can be viewed as strategic and catalytic for several result areas identified for the Swedish development cooperation with Rwanda”, said Mikael Boström, the Head of Development Cooperation after the signing ceremony.
According to the agreement, Sida Guarantee Coverage is Up to fifty (50) percent for Small and Medium enterprises that are seeking loans in energy projects, but it increases to 70% for qualifying female borrowers.
MSMES will qualify for a guarantee amount not exceeding $500,000 but female borrowers can qualify for up to $700,000 guarantee.
Meanwhile, the $10 million direct lending guarantee is meant to cover Mini-grids.
The BRD CEO Eric Rutabana said the guarantee comes to cover one of the bank’s priority sector.
“Supporting increased access to finance for clean energy is a crosscutting enabler for sustainable economic development, human health, equitable growth and quality of make “Qualifying Loans” to “Qualifying Borrowers” for “Qualifying Projects”.life for poor and vulnerable communities. This guarantee comes at the right time as BRD implements, on behalf of the government, the Renewable Energy Fund (REF) program – which aims at scaling up access to renewable energy across the country,” he said.
Rwanda seeks to make 100% energy penetration in the next six years.
According to BRD, the Guarantee aims to indirectly induce the Guarantee Beneficiary to make “Qualifying Loans” to “Qualifying Borrowers” for “Qualifying Projects.”