(L-R) Chairman of the Saint Lucia Development Bank, Nicholas Barnard, Chief Executive Officer of the CDF, Mr Rodinald Soomer, and Managing Director of the SLDB, Vincent Boland
The Caribbean region is set to benefit from significant investments in Renewable Energy (RE) and Energy Efficiency (EE) projects, with the rollout of the Credit Risk Abatement Facility (CRAF), a product of the CARICOM Development Fund (CDF), aimed at incentivizing investments in Small and Medium-Size Enterprises (SMEs), advancing RE and EE projects.
On April 28th, 2021, the CDF signed its first Master Guarantee Agreement, to provide partial credit guarantee, through the CRAF, with the St Lucia Development Bank. This move is expected to boost investments in projects advancing the use of photovoltaic systems, efficient air conditioning and lighting systems. This joint endeavour will empower Saint Lucian SMEs with the financial backing and security to pursue and complete clean energy projects, reduce their operating cost and increase their competitiveness.
Financing renewable energy projects remains a significant challenge for SMEs in Saint Lucia and the wider CARICOM region, despite the notable reduction in RE and EE technology costs, which in turn has led to appreciably lower capital needed to invest in new systems. With the support from CRAF, dedicated financing – together with risk reduction measures - will incentivize lending for sustainable energy projects.
Chairman of the SLDB, Nicholas Barnard, noted that the right financing model could incentivize private sector members keen to move forward with RE and EE solutions for their businesses. “This CRAF intervention is another pillar to support our national move towards a low-carbon economy and the creation of a sustainable economy characterized by an environmentally friendly, productive, efficient, and innovative private sector,” he explained.
The CRAF is primarily focused on supporting SMEs in the tourism, agriculture, and manufacturing sectors. This move to incentivize financing for these types of projects will be coupled with targeted technical support to SMEs, financiers and other industry players. This approach will yield significant environmental and societal impact, address critical knowledge gaps, stimulate demand and develop human capital.
Speaking at the signing ceremony, Chief Executive Officer of the CDF, Mr Rodinald Soomer, noted, “…the commercial banking sector has been reluctant to participate in the growing market for sustainable energy investments because of the perceived high risks involved in servicing SMEs interested in such investments. The key objective of the proposed credit risk reduction framework is to encourage these financial institutions to lend to small businesses with viable energy projects but which are unable to provide adequate collateral or whose cash flows require reinforcement.”
Mr Soomer also announced that three projects in Saint Lucia, valued at approximately US$1,000,000 or EC $2.7 million, have already received technical assistance under CRAF - with one applying to finance a project worth US$500,000 or EC$1.3 million. Additionally, he informed the gathering that, “In the next two weeks, the CDF will sign its second Master Guarantee Agreement with another financial institution with energy projects values at over US$1,000,000 poised to receive support under CRAF. Negotiations for two other agreements with regional financial institutions are at an advanced stage, and the expectation is they will be onboarded by the third quarter of 2021.”
To date, the SLDB has also participated in two capacity development exercises conducted by the CDF. Over four days, management and front-line staff benefited from a detailed orientation of CRAF and took a deep dive into important areas such as energy project financing, understanding of key project risks and borrower credit risk.
Established in collaboration with the CARICOM Secretariat’s Energy Unit and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), Technical Assistance Programme for Sustainable Energy in the Caribbean, the CRAF was informed by a 2018 feasibility study conducted by Camco Clean Energy. The development of this facility also benefitted from the dedicated work of a diverse group of regional stakeholders, lending their expertise over the last three (3) years to the collective mission of stimulating substantial incremental lending from local financial institutions to SMEs and to build out the regional market for sustainable energy investments.
The CARICOM Development Fund was established under Article 158 of the Revised Treaty of Chaguaramas. The creation of the Fund responds to the imperative identified in Article 157 of the Revised Treaty, to urgently address the needs of the disadvantaged countries, regions and sectors to enable them “to participate effectively in the CSME and to administer international trade agreements.” CDF operates within 12 Member States comprising More Developed Countries (Jamaica, Barbados, Suriname and Trinidad and Tobago) and Less Developed Countries 6 OECS countries: “Antigua and Barbuda, Dominica, Grenada, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines”, Belize and by special designation, Guyana). The core of the CDF’s mandate is aimed at promoting cohesion within the CSME. In this regard, the CDF is intended to address the needs of both the public and private sectors. To achieve its objective of addressing economic dislocation arising from the operation of the CSME, the CDF provides technical and financial assistance to:
The CARICOM Development Fund (CDF) (www.caricomdevelopmentfund.org) commenced operations in 2008. As a key developmental institution, it is committed to achieving its vision of providing effective, efficient and sustainable solutions that address the challenges faced by its Member States.
For queries, please contact:
CDF: Wayne Vitalis | email@example.com | 1 246 230-6830
Lavern MacFarlane | firstname.lastname@example.org | 1 246 243-1702
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