African Guarantee Fund Launches $5 Billion Facility to Drive Continent’s Energy Transformation

The African Guarantee Fund (AGF) has unveiled a groundbreaking $5 billion Local Currency Guarantee Facility designed to accelerate electricity access across Africa by supporting small and medium-sized enterprises (SMEs) in the distributed renewable energy sector.

The initiative represents a critical component of a broader mission to provide electricity to 300 million Africans by 2030, addressing a profound infrastructure challenge where approximately 600 million people currently lack reliable power access.

Jules Ngankam, AGF Group CEO, emphasized the strategic importance of the facility: “AGF’s leadership in driving financial innovation for SMEs aligns seamlessly with the goals of Mission 300. By addressing financing gaps and fostering public-private partnerships, AGF plays a crucial role in driving inclusive energy solutions, accelerating the energy transition, and reducing carbon emissions across the continent.”

The facility aims to overcome systemic barriers that have historically impeded energy infrastructure development, including high collateral requirements, currency mismatches, and limited long-term financing options for renewable energy projects.

Wale Shonibare, Director for Energy Financial Solutions, Policy and Regulations at the African Development Bank, highlighted the facility’s collaborative approach: “The Mission 300 Local Currency Guarantee Facility will encourage collaboration with African governments whilst leveraging concessional financing from the African Development Bank, the World Bank Group, and other development partners to scale the involvement of local banks in financing Distributed Renewable Energy solutions.”

Building on its successful Green Guarantee Facility, supported by the Nordic Development Fund and the Investment Fund for Developing Countries, AGF has demonstrated a proven ability to mitigate risks within loan portfolios. This approach reduces financial institutions’ exposure to defaults and enhances their confidence in lending to distributed renewable energy SMEs.

A recent landmark transaction in Madagascar illustrates the facility’s potential impact. AGF participated in a credit guarantee syndication for a 40 MW solar plant that provides improved electricity access to approximately 285,000 people. The project supports UN Sustainable Development Goals by reducing CO2 emissions by 34,000 tonnes through the displacement of thermal power generation.

The continent’s energy infrastructure requires an estimated annual investment of nearly $25 billion to achieve universal energy access by 2030. AGF’s innovative guarantee mechanism is positioned to play a crucial role in bridging this substantial financing gap.

The initiative aligns with broader continental objectives, including the Africa Energy Declaration, the African Union’s Vision 2063, and global Sustainable Development Goals. By fostering inclusive growth and climate resilience, the facility represents a sophisticated approach to addressing Africa’s complex energy challenges.