Accessing Green Finance: Hurdles facing African farmers

 

 

What is Green Financing?

 

 

Green financing is the financing of projects or companies that are now trying to reduce carbon emission using alternate sources of energy. Green financing is different from taking loans from banks or investors to put up your factory or plant. Green financing is specifically an initiative to combat climate change.

 

The terms and conditions of green financing are different from normal financing, and I think that is the major challenge Africa faces because to access green financing which is really meant to be for sustainable solution, there are a lot data that is required by banks or investors.

 

The bottom line is that green financing is money or resources that will be provided for initiatives to combat climate change.

 

 

How far do you think Africa can go to mitigate the effect of climate change using the Green Finance?

 

 

The funding is an important aspect and the reason why we are getting funding, let me put it into perspective, think about a farmer who is using diesel for example to irrigate his farm or to power up equipment and then comes access to such funding; remember or small scale entrepreneur or even the medium and small scale entrepreneurs cannot really get access to the banks, the primary reason for that is the credit rating, Africa generally carries a high risk of default on loans and that’s why we said that the green financing is now coming in handy.

 

The challenge now is the data required by banks and investors, the green financing has a couple of billion dollars available but the question is how do i access this money as a small scale farmer? There are a lot of processes and procedures in place not because they want to make it hard to access but they need accountability. They can’t just give funding to a large organization or a medium corporation that needs the funding, but if you really want to make an impact, you must have the data.

 

Now the small scale farmer or producer may not have the data required. So, banks are sitting with the money available, but they are unable to dispense it because, so banks are now using the green financing and reinvesting it into government bonds or other investments and earning money from it.

 

This money if made available with reduced bureaucracy and reduced amount of requirements, will definitely make a lot of impacts. The key thing here is that the accountability and measurement must be put in place.

 

With this bureaucratic way of accessing this fund, are we not looking at working with governments in Africa in order to reduce the stress of accessing these funds?

During the Africa Climate Change Summit held in Nairobi, there were major commitments made by UAE, UK and US, I know that the government of Kenya is in the process of making these funds available but remember that there has to still be that process, the government will still have to work, yes the government don’t have like a micro, small and medium association through which they will work, so I see the government work in different association like the manufacturing association, private associations so that they can be able to implement.

 

Remember as a whole contributes just about 4 per cent of the carbon emission, but that is not the issue, the issue is we suffer the must as Africans, if we have devastation as a result of climate change, the rains that are supposed to come don’t come. Africa suffers the most, farmers and businesses are not well equipped to tap into green financing to make their production sustainable.

 

In the East Africa, the governments are in the process but they are not there yet, they are consulting with professional firms to see how they can ensure the process to access these funds.

 

 

Are there measures to monitor how these funds are being utilised?

 

 

Very recently, two standards have been issued on sustainability and I think the second standard talked about climate change. How we monitor these is through the different accounting standard for example you are producing plastics and investors were coming to invest in such company or even the consumers are demanding that they want to see the value chain, so if you are manufacturing plastics, are you within the secular economy which means zero waste, it means if the plastics are not used does it go back and get recycled at some point and how are you part of that value chain.

 

So, standards now monitor this, for example, if people boycott the use of plastics, consumers may decide not to buy it because of the negative of buying plastics already has in our environment.

 

In Africa largely, because we are in a hurry to go the market, we don’t have the requirement to report, unlike the European market which are compliance market, they have the standards.

 

 

What are the sustainability plans for this green financing?

 

 

In terms of sustainability, these measures take place slow and steady, the discussion on climate change did not just happen recently, ten years ago we have already talked about climate change, we say we have issues in our ozone layer but we did not take action, I think how there is significant emphasis on climate change in the last two or three years, that is why you see countries coming together to say they want to go into compliance market and European markets are compliant and you are required to achieve net zero by certain year.

 

During the Africa climate change summit we did talk about how do we come together as a continent and drive our price up, remember we were not even benefitting either, compliance market are moving away from climate financing to carbon financing. 

 

Talking about sustainability, the second issue we face in Africa is that additional revenue that I am creating for my company will they be taxable. Can the government consider for instance they get funding to change a particular process in my business to be more green and contribute to the reduction of emission but at the same time, if I do generate a reduced carbon emission and I do manage to sell them, then the amount that I receive back in in-country can it then be tax exempt, those are the conversations we should be having, so that even the money that I get back I am not paying tax. In east Africa largely, it is 30 per cent, in Nigeria it could be 40 per cent, can I save that money and reinvest it.

 

Source: Nigerian Tribune Online