The African Development Bank (AfDB) has announced it has approved a financing package of US$100 million, comprising US$50 million equity and US$50 million convertible senior loan, to seed the Facility for Energy Inclusion (FEI), a pan-African renewable energy debt fund.

The investment, which is expected to catalyze energy access for an estimated 3 million people, is rooted on the Bank’s New Deal on Energy for Africa and increasing global recognition on the importance of energy access in Africa.

FEI will focus on providing senior and mezzanine debt to off-grid, mini-grid and small scale Independent Power Producers (IPP), i.e. projects with total costs under US$30 million. The Fund will provide hard and local currency financing.

The bank’s approval opens the door to a formal fundraising process, which seeks to raise up to US$400 million in additional investment from like-minded DFIs, impact investors and commercial banks. In preparation for this, the AfDB has held informal discussions with potential investors from the UK, US, Germany, Japan, and South Africa. A first closing is expected by mid-2017.

FEI has been structured by the Bank in consultation with other DFIs and in close collaboration with Dalberg, a globally reputable investment advisory firm, and Hunton & Williams, expert legal advisors with previous experience in fund creation. The structuring effort was made possible through generous financial support from the Sustainable Energy Fund for Africa (SEFA), a multi-donor trust fund anchored by the Governments of Denmark, Italy, UK and the United States – to support Africa’s renewable energy sector.

The Facility for Energy Inclusion will process eligible projects with relative speed through a highly specialized and focused external Fund Manager (FM). To this effect, the Bank has undertaken an international open tender inviting debt and equity fund managers with proven track-record in Africa. In November 2016, six prospective fund managers were shortlisted, from an initial pool of sixteen. The Bank expects to formally appoint the FM by February 2017.

FEI aims to create a significant number of jobs, new connections, and new opportunities for broader energy access, thus benefiting millions of citizens in underserved areas across Africa. It is well-documented that women bear the brunt of inadequate energy access based on distribution of responsibilities in the majority of African households. As a result of the Fund’s interventions, it is expected that the quality of life of many of them will be significantly improved.