Small and medium enterprises (SMEs) that are interested in investing in renewable energy technologies will now receive soft loans from the French Development Agency through Diamond Trust bank (DTB).
Agence Francaise de Development (AFD) and DTB have signed a credit agreement worth Shs 33bn to finance green energy projects in the country. Yves Boudot, the regional director for AFD in East Africa, said the soft loans are accessible to businesses interested in investing in technologies such as small hydroelectric power generation, geothermal, biogas, and solar.
“This technical and financial offer is particularly important to bringing additional solutions to achieve the diversification of energy resources in East Africa and help the region to move towards sustainable energy solutions that are technically, economically and financially viable,” Boudot said.
Varghese Thambi, the managing director of DTB, said the partnership will boost energy efficiency.
“Even for housing projects or universities or any of the corporate companies that want to reduce their power bills by using photovoltaic solar panels will benefit from the credit line,” Thambi said.
The Green Energy line of credit is one of the components of the large regional program called SUNREF – Sustainable Use of Natural Resources and Energy Finance.
Sophie Makame, the French ambassador to Uganda, encouraged other banks to take up the credit.
“Through this credit line, AFD has decided to provide some long-term, soft and locally-available financial resources. The needs being so huge in Uganda, more banks are welcome to join the program in the coming months,” she said.
Makame added: “This program will work as leverage; local banks will acquire capacity to be more engaged in this sector in the near future. A significant pipe of potential projects has already been identified and DTB is the first bank to engage in SUNREF in Uganda.”
According to David Sacotte, the team leader, SUNREF, the credit line also comes with a technical assistance program, funded by the Africa Infrastructure Trust Fund of the European Union.
The technical assistance will include project design, capacity building, project feasibility study and raising public awareness. Sacotte said this fund is for the private sector with a bias towards SMEs since it is the SMEs that have a challenge in energy-saving.
“The SMEs to get this will be DTB customers. The loans ranges will be between $50,000 and $1 million and the maximum payback duration will be 12 years. However, that will vary from project to project,” he said.
Thambi said that interest rates will vary from project to project and the interest rate will be between 2.5 and three per cent for dollar-denominated and about six per cent for the shilling-denominated loan.