Can Development Banks Really Deliver Africa’s Energy Transition, Or Are They Still Lending Too Carefully?

If finance is the lifeblood of the energy transition, Africa’s arteries are still half-blocked.

In 2024, the world’s multilateral development banks (MDBs) reported record climate commitments $137 billion in direct climate finance and an additional $134 billion in mobilised private investment, according to the African Development Bank’s joint MDB climate finance report.

At first glance, it’s an impressive figure, a 60 percent increase in climate lending over five years. But scratch beneath the surface, and a more complicated picture emerges. Despite this surge, Africa still faces the slowest clean energy buildout rate in the world. Nearly 600 million people remain without electricity, and those connected suffer unreliable supply.

The question isn’t whether MDBs are doing more. It’s whether they are doing enough differently.

Mission 300: The Ambitious Blueprint

In 2024, the World Bank and Africa Development Bank launched “Mission 300”, a flagship global effort to connect 300 million people to electricity by 2030, 60 per cent of them in Sub-Saharan Africa.

The initiative aims to mobilise $90 billion in blended finance, with the World Bank contributing $30–40 billion, the African Development Bank (AfDB) between $10–15 billion, and additional commitments from the Asian Infrastructure Investment Bank (AIIB) and the Islamic Development Bank (IsDB) totalling around $6.15 billion, according to Reuters (Reuters Mission 300 coverage).

On paper, the coalition looks formidable: a multilateral armada of capital, expertise, and ambition.

But Africa’s past experience with large development targets is sobering. Too often, big promises have produced small-scale impact: access counted by connections, not reliability; investment tracked by commitments, not disbursements.

In our past publications, we argued that Africa doesn’t need more “announced” megawatts; it needs power that works. The same logic applies here. MDBs must evolve from lenders into delivery enablers, faster, bolder, and more accountable to results on the ground.

Too Careful to Be Transformative

MDBs have mastered the art of safety. They lend where risk is contained, currencies are stable, and governments are creditworthy. Africa’s fragmented energy landscape rarely meets those criteria.

The result: MDBs end up recycling low-risk capital in middle-income markets, while least-developed countries, those most in need of power, get pilot projects and feasibility studies instead of grids and batteries.

A 2024 AfDB internal review showed that only 12 per cent of MDB climate finance to Africa went to projects in fragile or conflict-affected states, despite these regions hosting one-third of the continent’s unconnected population.

Africa’s problem is not a lack of capital; it’s the risk architecture around that capital. MDBs need to pivot from “how much they lend” to “how much risk they absorb.”

The Risk Africa Needs Them to Take

Africa’s energy transition will rise or fall on four financial reforms. Each is simple in principle but politically hard in practice.

1. Currency Risk Protection
   Most renewable projects in Africa generate local-currency revenue but borrow in dollars or euros. When currencies depreciate as they have across East and West Africa, developers face massive losses. MDBs can fix this by offering currency hedging at concessional rates or absorbing part of the devaluation risk themselves.
2. Guarantees, Not Just Loans
   MDBs’ balance sheets are structured around lending. But the real bottleneck is investor risk. What Africa needs are guarantees that unlock private finance, political risk insurance, payment guarantees, and first-loss protections. These instruments are catalytic but still underused: less than 7 percent of MDB portfolios involve them.
3. Speed and Flexibility
   MDB projects often take four to six years from approval to commissioning, an eternity in a continent facing daily blackouts. Fast-tracking smaller, distributed renewable projects could cut delivery times by half.
4. Blending Grids and Mini-Grids
   Africa’s future is not grid or decentralised, it is both. MDBs should finance hybrid systems: extending grids to towns while funding mini-grids for villages beyond reach.

If MDBs built their new climate finance playbook around these four levers, the impact over the next 12–24 months could be transformative.

The Case for African Ownership

There is also a geopolitical truth that MDBs must confront. Africa’s energy future cannot be designed in Washington, Paris, or Beijing.

African institutions, from the AfDB to sovereign green funds, must co-lead in shaping pipelines, standards, and risk tools. MDBs should be co-investors, not architects.

This shift in power matters. When African financiers and governments set the terms, investments become more grounded in local realities: community acceptance, tariff affordability, and grid interconnections.

Mission 300’s promise will ring hollow if its delivery mirrors the old top-down model of conditionality and control.

What Reform Would Look Like

MDB reform must become visible in three ways:

• From Loans to Leverage: For every $1 MDBs lend, they should aim to mobilise $5–6 in private capital, not $1–2 as now. That means retooling portfolios toward guarantees and blended instruments.
• From Approval to Disbursement: MDBs must halve project processing time. Fast-disbursing climate facilities for distributed renewables can set a precedent.
• From Global to Local Accountability: MDBs should publish disbursement-to-impact dashboards, showing how much money actually reaches African grids, clinics, and schools.

These reforms are not ideological. They are practical, measurable, and overdue.

MDBs at a Crossroads

The record $137 billion in MDB climate lending is not meaningless, but this is a starting point. But unless that money is channelled through faster, risk-tolerant, locally owned systems, Africa will remain in a paradox: the most energy-poor continent in a world awash with climate finance.

MDBs are no longer being judged by how prudently they lend, but by how courageously they invest.

As Energy Transition Africa argued in our recent analysis on Africa’s energy crisis and public health emergency, electricity is not just infrastructure; it is life. The clinic that loses power mid-surgery doesn’t care about concessional loan terms; it cares about light.

If MDBs truly want to deliver Africa’s transition, they must learn to lend less carefully and lead more boldly.

“Africa doesn’t need cautious lenders, what it needs are courageous partners.”

That is the standard against which MDBs should now be measured.