Following Abt-designed banker training in October 2017, Banco Hiptecario of El Salvador announced a new green line of credit for companies exploring renewable energy projects. Investments in clean energy have grown tremendously in the last decade, but further growth is constrained by lenders’ perceptions of significant risk in these projects.
As technical lead for USAID’s Climate Economic Analysis for Development, Investment, and Resilience activity (CEADIR), Abt Associates works with both borrowers and lenders to build trust and lower financing risk in clean energy. CEADIR works with more than 20 developing countries.
Starting in 2015, CEADIR conducted national assessments of clean energy lending in Central America. These surveys found that domestic banks had a limited understanding of clean energy technologies, business models, markets, and loan products — and therefore perceived clean energy loans to be highly risky.
Between October 2015 and December 2017, CEADIR trained 1,276 bank staff — more than half of them women — from nine banks in El Salvador, Guatemala, Honduras and Panama. The sessions on risk assessment and the clean energy markets in each country followed modules in the Clean Energy Lending Toolkit (CELT) — prepared under the Abt-led USAID Analysis for Investments in Low-Emissions Growth (AILEG) activity — which offers financial institutions a practical guide to launching a clean energy lending line of business.
New Knowledge Leads to More Lending for Clean Energy
Several trained staff promptly began financing clean energy projects. Banco Promerica in Guatemala launched a new line of green loans to finance clean energy investments. Banco Hipotecario in El Salvador announced they will target energy efficiency and renewable energy projects and offer loans with favorable terms to projects that receive the 2018 energy efficiency prize from the National Energy Commission.
“The support provided by CEADIR has been extremely valuable, since it has enabled us to adjust our Green Credit Line for Small and Medium Enterprises based on the needs of existing and potential clients,” Banco Hipotecario (BH) said in a February 2018 statement. “In addition, the training and technical assistance provided by CEADIR have strengthened BH's institutional capacity to evaluate and finance renewable energy and energy efficiency projects, which are perceived as increasingly important business opportunities in El Salvador.”
Providing More Reliable Power in El Salvador
Also in El Salvador, CEADIR worked with three banks to complete energy audits for clients exploring energy efficiency and solar energy technologies to reduce costs and problems resulting from frequent voltage variations. In Guatemala, CEADIR helped a bank restructure an existing loan for a hydropower project.
Additionally, CEADIR provided crucial market and bank information to facilitate a deal with $53 million in partial loan guarantees for three banks in El Salvador to scale up clean energy financing. In September 2017, USAID/El Salvador signed agreements with the banks under USAID’s Development Credit Authority (DCA) to reduce risks to banks as they increase lending for clean energy measures, as well as to small and medium enterprises (SMEs). CEADIR is supporting development of similar DCA guarantees in Guatemala and Honduras.
“CEADIR laid significant groundwork for success in Central America through a systematic approach to lending within this new market,” said CEADIR’s Chief of Party, Marcia Trump, Ph.D., an Abt principal associate for International Economic Growth. “We’re now taking this approach to West and East Africa and look forward to further success there.”
Learn more about CEADIR on the Climatelinks web site.