Green Financing Facility (GFF)
Green Finance is financing of activities that address climate change and other environmental challenges such as natural resource conservation, biodiversity conservation, and pollution prevention and control.
This offers a classification system for identifying activities and investments that will move Kenya towards meeting specific targets related to priority environmental objectives.
It will help financial actors and others determine which investments can be labeled “green” in their jurisdiction.
This is developed to encourage the undertaking of projects and activities that help scale up environmentally sustainable economic development.
GFF is established as a permanent investment mechanism with a start-up capital of KES 2.1billion (USD 15 million); KES 1.4billion (USD 10 million) from IFAD and KES 700million (USD 5 million) from GOK.
GFF is to contribute to the sustainable rural transformation, growth and income generation through alleviating the liquidity constraints of non-bank financial institutions and encourage small-scale farmers and micro-firms to invest in climate-smart and environmentally friendly activities.
GFF institutional structure comprises of lending entities (IFAD, GOK and Private Financial Institutions), Host Institution Agricultural Finance Corporation (Development Financial Institution or Commercial Bank), Wholesale Borrowers (SACCOs and MFBs/MFIs) and target beneficiaries (smallholder farmers and agribusiness-MSMEs).
Through RK-FINFA, the lending entities have provided the initial investment capital to the Host Institution for on-lending to Wholesale Borrowers at preferential interest rates, subject to the Wholesale Borrowers meeting the GFF eligibility criteria.
Eligible SASRA Regulated Savings and Credit Cooperative Societies (SACCOs) shall be in addition to
SASRA regulatory requirements to be compliant with the following;
- Has existing rural finance products appropriately priced for farmers, pastoralists, agribusinesses, and micro, small and medium enterprises
- Able to provide sufficient collateral to secure the wholesale loan facility
Sufficient rural branch network and proven demand for financial services by farmers, pastoralists, agribusinesses, and micro, small and medium enterprises - Provide loans at more client-friendly terms including longer loan duration, appropriate grace periods and competitive interest rates
Eligible Microfinance Banks and Microfinance Institutions shall;
- Be compliant with Central Bank regulatory requirements
- Have existing rural finance products appropriately priced for farmers, pastoralists, agribusinesses, and micro, small and medium enterprises
- Be able to provide sufficient collateral to secure the wholesale loan facility
- Have sufficient rural branch network and proven demand for financial services by farmers, pastoralists, agribusinesses, and micro, small and medium enterprises
- Provide loans at more client-friendly terms including longer loan duration, appropriate grace periods and competitive interest rates
GFF will finance green rural investments by the target group of RK-FINFA.
The Host Institution will target its wholesale loans to PFIs for financing activities and projects in climate change adaptation/mitigation, improved environmental management, and improved efficiencies in the use of natural resources.
Within the overall context of green rural and smallholder agricultural development, smallholder and microenterprise investments that qualify for GFF lending include, but are not limited to:
- Efficient use of water such as drip irrigation/sprinkler or micro-jet systems
- Flood protection measures both physical and biophysical
- Climate resilient infrastructure/increased robustness of infrastructure
- Climate smart farming including drought or flood tolerant inputs
- Soil and water conservation measures
- Renewable energy and energy efficient systems
- Water harvesting and water storage systems
- Agro-forestry, afforestation and reforestation
- Reduction of post-harvest food losses
- Rural insurance products
- Cleaner transport solutions.