The International Finance Corporation (IFC), a subsidiary of the World Bank Group, joined with the Netherlands Development Finance Corporation (FMO) to provide a $225 million loan to FirstRand Bank, based in South Africa. The funds will be used to finance green projects of South African small and medium-sized enterprises (SMEs).
Small and medium-sized enterprises (SMEs) are at the heart of sustainable development policies in South Africa. This role will be further enhanced by a $225 million package made available to them by the World Bank Group’s International Finance Corporation (IFC) and the Dutch development finance company Nederland’s Financierings-Maatschappij voor Ontwikkelingslanden (FMO).
It is actually a loan to FirstRand Bank. The financial institution will use the loan, of which $75 million is from the FMO, to finance green projects of its South African clients (SMEs) and to support climate-friendly infrastructure, agriculture and manufacturing initiatives. The funds are also intended to provide “enhanced” financial and advisory support for energy efficiency and intelligent water management projects in South Africa, thereby helping the country achieve its environmental goals.
IFC Technical Assistance
According to the IFC, its recent financial transaction with the FMO is part of its objective to develop the climate finance market in South Africa and support the South African government’s plan to move to a low-carbon economy. Nelson Mandela’s country has set itself the target of reducing greenhouse gas emissions by 42% by 2025 and diversifying its electricity generation away from fossil fuels such as coal by 2050.
The implementation of this energy strategy involves SMEs which, due to the deficiencies of the Eskom public company’s network, are turning to decentralized solutions to cover their electricity needs. “It is essential to support increased access to green and blue finance to foster a more inclusive, resilient and sustainable response to the growing climate risks to economic development. Our partnership with FirstRand is particularly important as South African companies recovering from the Covid-19 health crisis seek to develop sustainable projects,” said Adamou Labara, IFC’s Director in South Africa.
The World Bank’s private sector financing arm promises to accompany its financing with technical assistance in terms of impact monitoring, water stress management and other sustainable development solutions for SMEs seeking to reduce their carbon footprint.
Jean Marie Takouleu