Kenya’s banking sector is set to take a bigger role in financing climate, biodiversity and other sustainable projects under a new five-year partnership aimed at turning more green businesses into investment-ready ventures.
The Global Green Growth Institute (GGGI) and the Kenya Bankers Association (KBA) have signed a Memorandum of Understanding (MoU) to strengthen sustainable finance, green investment and inclusive green growth across the country.
The partnership seeks to bridge a persistent financing gap that has left many businesses struggling to secure funding for green projects, while financial institutions have raised concerns over the limited number of investment opportunities that meet conventional lending and bankability requirements.
“For too long, entrepreneurs have said banks are not lending, while banks have said there are not enough bankable green projects. This partnership is about closing that gap,” said Nagnouma Kone, GGGI’s Manager for Africa Strategy and Partnerships and Head of Kenya Office.
“We are bringing together SMEs, financial institutions, and public sector actors to move beyond discussion and create real transactions that accelerate Kenya’s green transition.”
The agreement was signed by Kone and KBA Chief Executive Officer Raimond Molenje during the launch of the International Climate Initiative (IKI)-funded SYMBIOTIC Project in Nairobi.
The partnership comes as Kenya seeks to implement its biodiversity commitments while increasing private-sector participation in financing sustainable development and the country’s transition towards a resilient, low-carbon economy.
GGGI said small and medium-sized enterprises, particularly women-led businesses, continue to face challenges accessing finance because of perceived risks associated with green investments.
At the same time, commercial lenders frequently cite a shortage of sufficiently bankable green projects as one of the obstacles preventing them from increasing lending to sustainable businesses.
The new collaboration will therefore focus on helping businesses improve their readiness for financing while working with financial institutions to develop products that are better suited to green and nature-positive investments.
The partners will seek to strengthen the ability of businesses to meet financial institutions’ requirements, including improving project preparation and developing investment opportunities that can attract commercial capital.
The partnership will also explore ways of reducing risks associated with green lending and increasing the use of innovative financing instruments.
These will include sustainability-linked bonds and green loans, which can help channel more private-sector capital towards climate and biodiversity projects.
Molenje said the banking industry has a central role to play in helping Kenya achieve its sustainable development objectives.
“Kenya’s banking sector has a critical role to play in financing the country’s sustainable development ambitions,” he said.
“This partnership provides an opportunity to strengthen market readiness, build institutional capacity, and support the development of practical financing solutions that can unlock investment into sustainable and green growth opportunities across the economy.”
Under the five-year agreement, GGGI and KBA will collaborate on sustainable finance policies and market practices while promoting green investment and strengthening the capacity of financial institutions to assess and finance sustainable projects.
The organisations will also work to develop a stronger pipeline of bankable investment opportunities and facilitate engagement between banks, businesses, government agencies, investors and development partners.
This is expected to create closer links between companies seeking capital and financial institutions looking for viable opportunities to finance projects with environmental and climate benefits.
Joint technical assistance programmes will form part of the partnership, alongside training, research and knowledge-sharing initiatives aimed at improving understanding of sustainable finance across the financial sector.
The partners will also support efforts to facilitate investment in Kenya’s transition towards a resilient, low-carbon and inclusive economy.
The initiative comes at a time when financial institutions face growing pressure to incorporate environmental, climate and sustainability considerations into lending and investment decisions.
For banks, this increasingly means assessing not only the financial viability of a project but also the environmental and climate-related risks and opportunities associated with their financing decisions.
For businesses, stronger project preparation and improved access to technical assistance could increase their chances of securing funding for climate and nature-positive investments.
The partnership is also expected to provide greater opportunities for SMEs, which form an important part of Kenya’s economy but often face financing constraints.
Women-led enterprises could particularly benefit from efforts to address perceived risks and improve access to sustainable finance.
GGGI and KBA will bring together financial institutions, government agencies, development partners, investors and private-sector actors to strengthen Kenya’s pipeline of sustainable projects.
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