OFID and the fight against energy poverty
To assist developing countries in their fight against Energy Poverty, OFID currently has at its disposal several fully-operational financing windows. The diversity of its instruments – which range from soft loans to outright grants – allows OFID to tackle both aspects of Energy Poverty: the provision of energy for basic human needs and the development of energy infrastructure aimed at promoting economic growth.
With the Energy and Transportation sectors together representing more than one-third of its total, cumulative commitments, OFID has gained extensive experience on the ground. The Energy sector alone covers nearly 20 percent of all OFID operations benefiting the public sector.
In working to alleviate Energy Poverty, OFID supports:
- the development of energy infrastructure through the extension of highly concessional loans to governments and soft loans to the private sector.
- the provision of micro-finance products to break the vicious circle of energy poverty that links energy development, real demand and income. Indeed, enabling poor people to increase and diversify their income by making available appropriate financial services is key to alleviating energy poverty among the very poor.
- the international trade of energy products benefiting developing countries.
- institutional and human capacity building in the field of energy through the provision of grant assistance.
With a view to accommodating the specific needs of its partner countries and staying in tune with the most efficient practices, OFID is also exploring additional financing mechanisms. One alternative being considered is the blending of concessional loans and grants to further increase the concessionality of OFID financing.
OFID’s approach to tackling Energy Poverty aims at reinforcing the effectiveness of the delivered assistance by harmonizing activities with sister and other development institutions in order to streamline joint effort and avoid duplication or overlap. In the same vein, OFID is also considering using its experience and partnership network to play a stronger catalytic role in attracting more financial support from the global development finance community to battle energy poverty. Given the scale of the investments needed to address the problem, this is a particularly tough challenge.