Microfinance Institutions - Financing Renewable Energy
World Bank Group
The World Banks investments in hydropower projects reflects international trends and demands. In the 1990 hydropower projects were strongly criticised throughout the world since social domains and investments in environmental protection were neglected and human rights have been infringed. Therefore lendings in hydropower during the 1990s significantly decreased accompanied by a shift to projects with fewer environmental and social impacts.By the early 2000s, however, several policies repositioned the World
Bank Group in terms of infrastructure and risk, and established a renewed framework for hydropower.
Thus lending increased over the last five years. In the years from 2002 to 2004 avergae new lending per year amounted to less than $250 million; between 2005 and 2007 avergae new lending increased to $500 million per year. In 2008, new lending exceeded
$1 billion, with an increase in larger, standalone projects (see Figure).
Since 2003 67 hydropower projects have been approved amounting to 3.7 billion USD in WBG contributions (US$3.2 billion for hydropower components) to support almost 9700 MW in project investments.
The majority of the projects have been approved in Africa (Senegal, Democratic Republic of Congo, Sierra Leone, and Uganda) and Asia (People’s Democratic Republic of Laos, India), as well as several rehabilitation projects in Eastern Europe (Ukraine, Macedonia, and Georgia).
Over the time the WBG has adapted product lines and financial instruments. Over the period 1992–2002, the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) accounted for 99% of the lending portfolio, and International Financial Corporation (IFC) the remaining 1%. During 2003–08, IBRD/IDA’s lending decreased significantly,to 58%—mainly because of an absolute decrease in IBRD lending. At the same time, IFC increased support (to 20%), as did carbon finance (to 5%), and guarantees (to 17%), reflecting increased private sector involvement.
The WBG’s assistance extends beyond lending—to technical support, knowledge sharing, policy dialogue, economic and sector
work, and support during project preparation and implementation. In these roles, the WBG draws on a range of products and services which were developed after the fall of lending in the 1990s. These products in form of operational directives and safeguards, coupled with the ongoing development of tools such as Strategic Environmental Assessment and payments for environmental services offer the Bank opportunities to add imputs to hydropower efforts.
