Rwanda’s new fund dubbed “Green Investment Facility” which is solely dedicated to financing private investors’ green projects is expected to be launched at the 27th UN climate conference (COP27) taking place from November 8 to November 18 in Egypt, officials have announced. Teddy Mugabo, the CEO of Rwanda Green Fund known as FONERWA [ which provides grants to public, private, and NGOs initiatives] said that the new financing facility for only private-sector green projects will be managed in partnership with the Development Bank of Rwanda (BRD). The facility will operate under the “Green Bank” model and is seeking $100 million to start operations. Mugabo was talking about in a Twitter space dialogue dubbed “Accelerating green investment and green investment opportunities” on Wednesday. “We had to rethink about instruments we need to put in place to attract private capital. This is how the Green Investment facility came about. Its first objective is to leverage private investments and the second objective is to provide tailored financial products to attract the private sector,” she said. She said that the fund aims to make green finance affordable. “Green ventures are always seen as high risk. Commercial banks do not want to go that route because when we talk about green projects, there is a lot of innovation, there is a need to rethink technologies, and the moment you start thinking about these, perceptions of risk increase. So that is the role of the facility to de-risk,” she said. Mugabo said that the financing facility has two windows. One window which will be managed by Rwanda Green Fund (FONERWA) is the ‘project preparation facility. “This will provide grants to support early-stage businesses. Here I mean we might have an entrepreneur who is in waste recycling who might have an idea that needs to be tested. So through the project preparation facility, we want to support entrepreneurs by giving them business development support or they might need the grant to test their products like a proof of concept,” she explained. She also highlighted that this window will finance feasibility studies for projects such as renewable energy projects. “If they have to conduct feasibility studies, we will provide grants or reimbursable grants to them. We want to de-risk through grants where we can help projects move from ideation to bankability,” she said. Handling the issue of lacking bankable green projects She said that the decision to provide grants to de-risk projects was triggered by a lack of bankable projects. “This is because one of the biggest challenges looking at the bank’s side is that they might be willing to invest in green projects but there is a lack of a pipeline of bankable projects,” she noted. She said the fund will offer products that go all the way from ideation of business development support to proof of concept. “It will help to build projects which when they are ready to scale can then move to a credit facility that will be managed by the Development Bank of Rwanda (BRD) which can provide debt financing. We are looking to provide concessional and affordable financing. If in commercial banks, interest rates are at 18 percent we will try to reduce to lower interest rates,” she said. “We will make sure that we try to source and get affordable financing. There's more sort of incentivizing them,” reiterated Jean Claude Iliboneye, The Head of the Business Development Fund at BRD. She said that the fund has also thought of providing a partial credit guarantee that is going to support those green projects that actually have issues of collateral. “We will have blended financing where there could be a mixture of grant and debt to make sure that at the end of the day the cost of financing is low and affordable. We will be engaging with financial institutions,” he said. Nick Barigye, CEO of Rwanda Finance Ltd said that it is also in the drive to attract sustainable green investments. “Sustainable finance means environmental, social, and governance factors for any economic activity that you are doing. And giving examples, if you're talking about the environment, are you considering how you pollute? have you put into consideration how you are going to handle pollution, how you are going to deal with waste management?” he explained. Rwanda plans to reduce carbon emissions by 38 percent by 2030 and this will require Rwanda to mobilize $11 billion by 2030.
