The Swedish International Development Cooperation Agency (SIDA) has signed a $20 million (Rwf17.6 billion) guarantee with Rwanda Development Bank (BRD) to support renewable energy businesses.
The portfolio guarantee agreement was signed yesterday and spans a period of eight years.
According to BRD, the purpose of the guarantee is to facilitate increased access to finance for private actors active in the development of affordable and renewable energy solutions in Rwanda.
In addition, it aims to facilitate increased access to finance for end-users of renewable energy solutions, both micro, small and medium enterprises and households.
This, the banks says, will contribute to increased access to energy, as well as sustainable and environmentally friendly development in Rwanda.
Of the total guarantee amount, $5 million (Rwf4.3 billion) is the amount available for direct lending from BRD to qualified borrowers, while $15 million (Rwf13 billion) is the guarantee amount available for in-direct lending through on-lending institutions.
This means that renewable energy businesses will be able to apply for the second category of guarantee through commercial banks, micro-finance institutions and SACCOs.
According to the agreement, the maximum loan amount for each borrower is $1 million (Rwf867.5 million), or the corresponding amount in Rwandan franc, under both guarantees.
At the signing ceremony in Kigali, the Swedish ambassador to Rwanda, Jenny Ohlsson, noted that Sweden will share up to 50 per cent of the risk of BRD’s or the on-lending institutions’ net losses.
She also indicated that in a bid to encourage female qualified borrowers, the equivalent share will go up to 70 per cent.
According to the agreement, the guarantee has the potential to generate up to $40 million for renewable energy financing.
BRD says that the guarantee is also designed to compatible with the credit line received through the Renewable Energy Fund (REF) Project for off-grid technologies and private-sector participation in renewable off-grid electrification, administrated by BRD.