Energising Finance: Missing the Mark 2020 is an analytical report by SEforALL on the gaps between public sector Development Finance commitments and disbursements focused on energy projects in High-Impact Countries (HICs). The HICs are 20 countries in Africa and Asia that account for approximately two-thirds of those without access to electricity and clean cooking, and three-quarters of those who use solid fuels to cook and heat their homes. Support for these countries is therefore needed across the international, regional and national levels.
Overall, the report aims to inform policy and finance decision-makers to undertake actions needed to address disbursement efficiency and accelerate deployment of resources to the energy sector.
CSOs in the energy space play a critical role in monitoring government policies and actions and holding them accountable. The Coalition therefore highlights some of the key takeaways and recommendations from the report to help CSOs identify critical entry points for engaging governments in efforts to accelerate achievement of SDG 7.
- Disbursements for energy in HICs have increased much faster than overall development finance disbursements- Disbursements for energy projects in HICs increased by more than 61 percent between 2013 and 2018. This is much faster than overall development finance disbursements over the same period in the same countries, which was about a 12 percent increase.
- Energy finance disbursements continue to significantly lag behind commitments- Despite a trend in growing energy finance disbursements, disbursements (USD 32 billion) still substantially lagged commitments (USD 52 billion) in the period 2013 to 2018. Given the continued low levels of commitments for energy finance, the lag in disbursements only compounds the lack of finance flowing to the sector, leaving many HICs further and further behind.
- On average, disbursement delays have declined since 2002- Project delays and delayed disbursements were often seen as interlinked. While there has been a slight decline in disbursement delays, they remain substantial; 58 percent of planned disbursements to the energy sector and 49 percent of projects in HICs were delayed in the period 2002 – 2018.
- Project-specific factors such as sound project design, including consideration for limited local financial services and good coordination among key actors, are crucial to efficient disbursement.
For electricity, the high-impact countries (HICs) are: Angola, Bangladesh, Burkina Faso, Chad, Congo (DR), Ethiopia, India, Kenya, Korea (DPR), Madagascar, Malawi, Mozambique, Myanmar, Niger, Nigeria, Pakistan, Sudan, Tanzania, Uganda and Yemen.
For clean cooking, the high-impact countries (HICs) are: Afghanistan, Bangladesh, China, Congo (DR), Ethiopia, Ghana, India, Indonesia, Kenya, Korea (DPR), Madagascar, Mozambique, Myanmar, Nigeria, Pakistan, Philippines, Sudan, Tanzania, Uganda and Vietnam.
Key Policy Recommendations and Opportunities for CSOs Engagement
- Multi-lateral Development Banks( MDBs) should introduce more precise and standardized tracking indicators for energy access finance disbursements to better measure progress in order to inform mitigation actions: CSOs in sub-Saharan Africa must engage with AfDB to advocate for development of tracking indicators for energy access finance disbursements. Particularly, AfDB has several projects lined up, and CSOs should be involved in the project design phase for these investments. In the recent AfDB CSO Forum held in November 2020, the Bank indicated that they welcome the involvement of CSOs in project design. If CSOs are involved in project design they can call meaningful tracking indicators and for better project administrative procedures that reduce bottlenecks and are responsive and sensitive to the needs of the poor as CSOs understand the needs of the people best.
- National policymakers should improve the country-level factors that can accelerate disbursements for energy projects: The report highlights that lack of awareness about modern energy access solutions and their benefits hinders project implementation and threatens timely disbursement; weak public awareness limits demand, which prevents project uptake and delays disbursements, especially in a results-based financing scheme. The report therefore recommends that awareness campaigns must be built into energy access projects and should be at the center of clean cooking project design. To this end, CSOs must undertake awareness campaigns, particularly around existing support schemes and knowledge sharing of the benefits of clean fuels and technologies for cooking.
- Donors and Development Finance Institutions (DFIs) should combine investment programmes with technical assistance and capacity building for recipient countries and institutions to increase the efficiency of disbursement at country level: the report indicates that lack of coordination among stakeholders i.e. government, private sector, CSOs and implementing partners, among others, coupled with institutional structures, capacity and administrative requirements threaten timely disbursement of finance for policy projects. In this regard, CSOs must advocate and convene multi-stakeholder dialogues to improve coordination, information flow and stakeholders interaction.
- Another aspect is for CSOs to lobby government to ensure technical assistance services focusing on the end-users are integrated within the project and also lobby for the role of blended finance as it prevents disbursement delays by developing public financial incentives (e.g. guarantee schemes) that de-risk investments for local banks thereby improving access to local finance. ACCESS Coalition through its Learning Group plans to build the capacity of CSOs to advocate for SDG 7 planning and investment. A key learning outcome will be to understand the reasons for discrepancies between commitment and disbursement of development finance in countries. Once this is established, the Group will establish strategies for effective advocacy to relay these issues to governments. CSOs interested to learn more about this can reach out to the secretariat.
Further CSOs should lobby AfDB to increase its funding contribution on energy projects in the region as it does not appear in the top contributing funders of HICs yet Africa houses majority of the HICs. The top contributing funders to HICs included the Asian Development Bank (ADB) (20 percent), and the World Bank Group members: International Development Association (IDA) (18 percent), International Finance Corporation (IFC), and the International Bank for Reconstruction and Development [IBRD] (both 6 percent).