Costly lending rules stifle Africa’s clean energy push, investors warn

Africa’s efforts to scale up clean energy are being held back by financing rules that do not align with the needs of mid-sized renewable projects, according to investors and developers. They say current lending systems are designed for large-scale infrastructure, leaving smaller ventures struggling to move forward. Speaking at the Africa Investment Forum on November 27 in Rabat, Morocco, investors warned that development finance institutions often apply big-project requirements to modest initiatives, creating delays that constrain electricity access across the continent. ALSO READ: Africa urged to swap aid dependence for private capital to drive development During a panel discussion on investing in resilient energy solutions, experts noted that rigid lending conditions are increasing costs, stretching timelines, and causing many promising projects to stall or collapse, ultimately slowing Africa’s energy transition. “You cannot apply the same conditions for a 1,000-megawatt project to a 30 or 40-megawatt project. The procedures drag on, the costs soar, and at the end of the day, the country suffers. There is this project where lender advisory fees alone accounted for nearly 40 per cent of the total cost, demonstrating how rigid rules can undermine project viability,” said Hashim Ghabashi, President of ACWA Power’s operations in the Middle East, Africa, and South Asia. ALSO READ: AfDB President urges investors to tap African youth potential Investors stressed that better alignment between regulation, financing, and execution is crucial to unlocking Africa’s energy potential. Standardised power purchase agreements (PPAs), stronger credit enhancement tools, and deeper regional integration, they said, could help expand market size and reduce perceived investment risk. Nkemjika Onwuamaegbu, the Regional Head for Africa at the Multilateral Investment Guarantee Agency (MIGA), highlighted the importance of multilateral guarantees in reducing investor risk. “Our mandate is to address non-commercial risks, such as regulatory uncertainty or off-taker credit risks. With the right de-risking tools, projects become bankable and investors confident. Initiatives like the World Bank Group Guarantee Platform aim to consolidate and streamline these instruments to accelerate private-sector investment in clean energy,” she said. Yet from an investor perspective, the creditworthiness of the off-taker remains the central challenge. ALSO READ: Tap water could be safely drinkable in Rwanda by 2029 Tom Longmuir, a Partner at Ashurst LLP, noted that even the best-structured project is doomed if the off-taker cannot meet payment obligations. Partial risk guarantees and multilateral support, he added, are therefore vital to unlocking private capital. Market experts also stressed the need to involve local banks and expand local currency financing to attract more investors. “There’s an automatic tendency to rely on hard currency loans, but many governments lack the reserves to support these payments. To scale projects sustainably, we need a balance between hard and local currency financing, and we must involve local banks and developers. Without their participation, we risk limiting ourselves to demonstration projects rather than building a truly sustainable energy sector,” one expert said. She added that Africa currently accounts for just 2 per cent of global green investment despite abundant renewable resources and significant growth potential. Experts agreed that addressing current barriers through standardised regulation, regional integration, effective de-risking instruments, and greater local financial participation could position Africa as a global driver of the energy transition.

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Costly lending rules stifle Africa’s clean energy push, investors warn