Tier two and three banks as well as corporates will be able to get green financing without having to issue a green bond on the Nairobi Securities Exchange through a special purpose vehicle.
Lion’s Head Global Partners, a Nairobi-based investment bank under the Green Bonds Programme Kenya, plans to establish the Kenya Green Bond Fund.
The facility will allow small and medium banks that may not have individual ‘green portfolios’ to access financing for viable green projects.
“Through the pooling structure, more banks can benefit from the GBPK unlocking a larger potential for green financing/investing in the country and the greater East Africa region,” Dutch Development Bank (FMO) Bart Heinink said in a report.
The report launched on Tuesday by Financial Sector Deepening Africa said banks had already started identifying opportunities to access financing.
“In the coming months the programme intends to sign a Memorandum of Understanding with the banks that have expressed their interest in participating in the pooled vehicle and to conclude on the structure of the Secial Purpose Vehicle,” the report stated.
Despite government making significant strides in issuing a green bond, efforts have slowed down due to a poor macroeconomic environment and effects of the interest rate cap.
“The current interest rate environment in Kenya is not necessarily conducive to bond issuance…proper risk-pricing has essentially been eliminated by the ceiling,” the report stated.
GBPK now believes the first green bond will be issued before the end of June 2019, having started discussions in 2016 and announcing it would be issued in 2017.
The green bond will be used to fund projects that have positive environmental and climate benefits. It will be issued locally, but open to foreign investors.
Green bonds serve as alternative fundraising options to enable Kenya meet its overall developmental agenda by making funds available in support of green activities and initiatives.