Addressing delivery challenges for renewable energy financing programmes

2022

Relevant Topic(s) Tags

Project Support

Commercial Banking & SME Finance

Thematic Loans

Summary

The Rwanda Renewable Energy Fund (REF) was developed to accelerate off-grid access to electricity in rural areas in Rwanda. The programme aims to promote private sector-led off-grid renewable energy development. It provides lines of credit in local currency to financial institutions to finance solar home systems and mini-grids, and solar companies offering those solutions. By doing so, REF helps creating an enabling environment for off-grid solar electrification. The project was implemented by the Government of Rwanda through the Development Bank of Rwanda (BRD), with management support from the World Bank and financing from the CIF’s Scaling Up Renewable Energy Program (SREP). The initial REF programme contained multiple financing ‘windows’. One window was designed to enable solar companies to secure financing from savings and credit cooperatives, banks, and Microfinance Financial Institutions (MFIs), although ultimately, credit lines on commercial terms were not an adequate incentive for many private financial institutions to extend lending. The other window involved offering direct financing from BRD to solar companies. To boost uptake, subsidies were also introduced mid-way as a solution to overcome the unaffordability of solar home systems for the targeted households.

Key Takeaways:

Multiple financing sources: While directing solar companies to local private lenders was well-intentioned, direct loans from the Development Bank of Rwanda were more effective.

Tackle affordability: Subsidies and other grant-based interventions can be necessary complements to unlock access to markets – especially for interventions benefiting low-income households.

Active consultation: Ongoing dialogue to understand the needs, perceived challenges, and opportunities of the private sector is key to success – and can be supported through robust market consultations and real-time monitoring.

Continuous dialogue between MDBs & Governments: There is a need for continued dialogue between multilateral development banks (MDBs) and government to address delivery challenges stemming from policy and regulation.