As Egypt gets ready to host the COP27 Global Climate Change Summit in November, Egyptian industries increasingly are turning to “green finance” to help them adopt energy-saving technologies, with the aim of cutting down harmful greenhouse gas emissions.
A European-funded financing facility called GEFF in Egypt has become a key source of such financing for Egyptian manufacturers seeking to keep pace with efforts to combat climate change.
GEFF in Egypt is supported by the European Bank for Reconstruction and Development’s Green Economy Financing Facility (GEFF), in cooperation with the French Development Agency and the European Investment Bank. Its mission is to support Egypt’s transformation into a green economy, says the initiative’s website.
Egypt’s banking sector plays a role in providing green financing. The Central Bank of Egypt issued guidelines for sustainable financing in the banking sector more than a year ago, and the bank’s governor, Tarek Amer, recently reaffirmed that commitment. In a statement released in August, Amer said that sustainable development goals cannot be attained without banks having an effective role in directing finance to more sustainable economic activities.
How One Company Benefited
Bahaa Badie, a leader in a home-appliance manufacturing company in Egypt, said the company had obtained a loan through GEFF in Egypt that helped it improve energy efficiency in its production processes, saving $244,000 annually in the process.
Companies can apply for green finance loans through participating local banks. To qualify for a loan, a project must achieve at least a 20-percent improvement in energy or water use efficiency, and reduce carbon emissions.
“The move helped us save a large amount of natural gas consumption, by changing 13 energy-intensive plastic injection machines with more efficient ones,” he told Al-Fanar Media. Other energy-saving steps it took included purchasing a new plate-cutting line and a new boiler that reuses the water vapour it produces.
“In addition to reducing the factory’s gas consumption by 25 percent,” Badie said, “it managed to cut down 2,000 tons of carbon from manufacturing annually by operating in an environmentally friendly way. Similarly, the company covered the roofs of its 21 factories with solar panels to keep pace with the shift towards a green economy.”
Badie said the company financed these improvements with a loan of $3.5 million it obtained in 2017 from the National Bank of Egypt, a partner of the GEFF programme.
How to Get a Green Finance Loan?
Companies that want similar help from GEFF in Egypt for green-technology projects can apply to participating local banks, provided they have a tax card, are registered in the Commercial Registry Office, and hold a license for the industrial or hotel facility they want to upgrade. According to banking sources, the loan is offered at an interest rate of 5 percent, and it should be repaid over a period ranging from five to seven years.
An official in the international financial services sector at the state-owned National Bank of Egypt said that as soon as an investor requested a loan, experts conducted a preliminary assessment of the investment opportunity the borrower wanted to achieve. “All details are reviewed, until the application’s approval or rejection,” he said.
“The programme provides free advisory services to borrowers to ensure successful final results and assistance in conducting financial analyses of investment opportunities the borrower wishes to implement.”Hoda Sabry, head of the finance group in Egypt’s Green Economy Financing Program (GEFF).
The same official, who requested anonymity, said that several conditions must be met to obtain green financing. Companies must provide installation certificates or maintenance contracts attached to purchase documents to confirm the implementation of the project according to the agreement.
“After the completion of the project, an evaluation is conducted to ensure the adoption of the new technology in the entity that obtained the loan and how it meets the principles of the green economy,” the official explained.
Loans as a Profit-Making Tool
Hoda Sabry, head of the finance group at GEFF in Egypt, said green finance loans have spread in Egypt in recent years, especially since 2015 when the financing package for sustainable development was signed by the European Bank for Reconstruction and Development.
“These loans are a profit-making tool by providing production expenses in the industrial sector and operating expenses in tourism and agriculture,” she told Al-Fanar Media.
The European bank provides these loans through Egypt’s local banks, she said. It has allocated $200 million to the National Bank of Egypt and $100 million each to Banque Misr and Qatar National Bank, she added.
To qualify for a green finance loan, a project must meet several criteria, Sabry said. These include whether the project will achieve at least a 20-percent improvement in energy or water use efficiency, and reduce carbon emissions.
Sabry said the bank helps borrowers to identify the best solutions for a successful green economy project, and the best ways to achieve these goals. The bank also helps identify the most appropriate equipment and high-efficiency materials to use and provides consultations that can transform green projects into sustainable investments, she added.
“The program provides free advisory services to borrowers to ensure successful final results and assistance in conducting financial analyses of investment opportunities the borrower wishes to implement,” she said. “It also checks the quality of the benefits achieved after implementation, all by impartial experts.”
For further details about how to borrow from the Green Economy Financing Program, click here.
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Read more about Egypt’s preparations to host the United Nations’ COP27 climate-change conference in Climate and Environment, an archive of Al-Fanar Media’s reporting on this topic.