Dr. Kojo Appiah was one of many grid-connected electricity users in Ghana frustrated by frequent power outages. In early 2016, Dr. Appiah, a 45-year-old entrepreneur who was previously an engineering advisor in California’s Silicon Valley, launched KATA Solar to offer rooftop solar installations to commercial, industrial and residential users as an alternative to grid-supplied electricity and backup diesel generators. Although Dr. Appiah identified many potential customers, he had difficulty finding domestic commercial banks to lend to KATA Solar. Finally in late 2016, he secured credit from an individual Japanese investor.
KATA Solar is one of a dozen Ghanaian companies offering rooftop solar. Sales of solar products in West Africa’s off-grid energy access market jumped by nearly one-third in the first half of 2017. Mini-grids and small pay-as-you-go (PayGo) systems for residential and microenterprise users also have major potential. But all these clean energy applications share a common challenge: limited access to finance.
Excluding South Africa, more than 80 percent of the international financing for clean energy in sub-Saharan Africa is in the form of loans. Most of this lending is dominated by multilateral and government development banks,  as international and domestic commercial banks are reluctant to lend to technologies and business models perceived as risky.
Those banks willing to consider clean energy lending did not offer loan products with terms suitable for entrepreneurs, such as longer repayment periods, loans denominated in local currency, and reasonable collateral requirements. Additionally, commercial banks often lack experience in raising capital from multilateral development banks and funds, bilateral donors, and impact investors.
From October 2016 to March 2018, experts from the USAID-funded Climate Economic Analysis for Development, Investment and Resilience (CEADIR) activity assessed the clean energy markets in eight West African countries — Côte d’Ivoire, Ghana, Guinea, Liberia, Niger, Nigeria, Senegal and Sierra Leone  — and trained domestic and international commercial banks interested in starting or scaling up clean energy lending on technologies and business models.
These training sessions followed modules in the Clean Energy Lending Toolkit, which offers financial institutions a practical guide to launching a clean energy lending line of business and was prepared under the USAID-funded Analysis for Investments in Low-Emissions Growth (AILEG) activity (it is available in English, Spanish, and French). CEADIR’s local finance experts worked closely with selected banks in each country on diagnostics to help them identify their markets and develop suitable loan products for rooftop solar, PayGo, and mini-grids.
The CEADIR activity, through Power Africa, a U.S. government-led initiative coordinated by USAID, also promoted clean energy lending by:
- Guiding banks’ market development strategies;
- Connecting banks with project developers and businesses seeking financing;
- Advising banks on obtaining lending capital from multilateral development banks and funds, bilateral donors, and impact investors; and
- Sharing information on partial loan portfolio guarantees from USAID’s Development Credit Authority and other donors.
One of the banks that participated in CEADIR’s 2018 workshop in Ghana on rooftop solar financing subsequently began loan negotiations with KATA Solar. Dr. Appiah acknowledged that, “There is no question that CEADIR's involvement has facilitated and positively impacted the banks' interest, engagement and overall response to this effort.” Engagement from local banks, and the associated potential for financing options, present new opportunities for businesses like KATA Solar as well as for clean energy scalability in West Africa.
1. Global Off-Grid Lighting Association, “Global Off-Grid Solar Market Report, January-June, 2017,” page 16. Accessed at: https://www.gogla.org/sites/default/files/resource_docs/gogla_sales-and-impact-reporth12017_def.pdf.
2. Bloomberg Climatescope 2017, “Emerging Markets Clean Energy Investment,” accessed at: http://global-climatescope.org/en/insights/emerging-markets-investment/.