African banks have remained relatively resilient during the pandemic but they face lingering challenges.
Almost half of all banks worry about a deterioration in their loan portfolios, while 21% are concerned about the increased risk of new lending, according to the European Investment Bank’s new Finance in Africa report.
In partnership with Making Finance Work for Africa, the EIB surveyed 78 banks in sub-Saharan Africa in early 2021 to learn how they were coping with the COVID-19 crisis and their views on climate risk, green finance, and digital financial services. The Finance in Africa report is largely based on the survey results.
African financiers are beginning to take advantage of opportunities in digital and green finance. 70% of banks in sub-Saharan Africa say green finance is an attractive opportunity. Nearly 55% actively look at climate change when making strategic plans, and more than 40% of African banks have hired employees to focus on renewable energy projects. However, only around 10% of banks have tailored their products to serve green finance.
African banks are aware that climate change could damage their lending portfolios. 70% of banks surveyed say they consider climate risk when making investment decisions, while 40% assess climate risk across their broader portfolio. To boost climate finance, the EIB recommends training banks and other lenders on how to tailor their finance to green projects.