African banks warm to financing renewables

From the newsletter

For a long time, commercial banks in Africa have shied away from investing in renewables, citing either a lack of capital or perceived risks. Multilateral financing institutions, such as the World Bank and AfDB, have been the primary funders. Now, more commercial banks are investing in renewables.

• Our February 2025 funding data shows that local and international banks provided over $2.4 billion in funding for renewables. South African banks Investec and RMB, in particular, funded a wind project by SolarAfrica with over $96 million.

• Though the sector still gets significant funding from development finance institutions. German development bank KfW, the European Union, and British International Investment contributed over $1.2 billion in debt funding to de-risk renewable projects.

More details

• Multilateral financing institutions and Development Finance Institutions (DFIs) have played a key role in risk mitigation to attract investments in renewables. The sector, which was previously dominated by small projects in Africa, is now seeing many projects crossing to the gigawatt scale. Investors are seeing reduced risks and greater potential as the continent races towards connecting its people to electricity.

• The recent project is the $2.3 billion 2 GW wind project in Egypt, which was mainly financed by Standard Chartered Bank and Arab Bank. Standard Chartered Bank, in particular, has been active in financing renewables in Africa and across the world. Last month at the Africa Energy Summit, it pledged to mobilise $300 billion in green and sustainable financing by 2030. It has financed other projects, including the $1.34 billion in solar PV projects in Angola and the $107 million solar-powered street lights for rural Senegal.

• Alongside international and commercial banks, government-owned banks like the Development Bank of Namibia and state entities such as the Uganda Energy Credit Capitalisation Company (UECCC) also contributed to renewable energy financing. The private sector was not left behind. Futuregrowth Asset Management and ACED all provided over $46 million for scaling up renewable energy deployment.

• The South African bank market seems to be the most active, with two banks, Investec and RMB, participating in funding. RMB has funded other projects in South Africa, including a 50 MW concentrated solar power (CSP) plant in the Northern Cape, which it funded with $45 million. The bank has committed $550 million to fund renewable energy projects.

Our take

• The renewables market in Africa is no longer as risky as banks initially perceived. Those who have invested in the sector have seen returns. Standard Chartered Bank projects $1 billion in income from sustainable energy projects in 2025. This just shows why they are committing $300 billion for renewables financing.

• Africa is witnessing the construction of gigawatt-scale projects. This pushes demand for capital financing much higher. Commercial banks alone won't be able to satisfy the market demand and will need private investors to chip in.

• Even as the sector keeps attracting commercial banks, big projects come with big risks if they face challenges, particularly in currency fluctuation. DFIs and other global lending institutions like the World Bank still have a bigger role to play in providing de-risking mechanisms, such as through currency hedging.