In recent years, Ghana has seen a surge in green startups across the country. These innovative ventures are addressing prevalent environmental concerns while also driving economic growth and job creation. But the path from a brilliant green idea to a bankable project is not always straightforward.
The hard truth is that many green startups in Ghana are falling at the first hurdle—securing that crucial initial funding. This is where banks like Absa come into play. In order to receive funding, however, a green project must be ‘bankable’.
So, what makes a green project ‘bankable’? First, it needs to demonstrate financial viability. If it takes more than three years to generate revenue, banks are likely to hesitate. The focus is not just on green credentials; there needs to be a clear path to profitability. Banks look for projects that can generate sufficient cash flow to support loan repayments. Profitability is key for a project to be considered bankable.
Creditworthiness also plays a critical role. Entrepreneurs must show a history of consistent debt repayment, as this signals a borrower’s ability to manage loans effectively. At the same time, the environmental impact of the project must be quantified. In a country where about 2% of forest cover is lost annually, every effort to reduce carbon emissions, save trees, and enhance energy efficiency counts. Green startups often create social benefits as well - job creation or improvements in public health. In Ghana, where youth unemployment is a serious concern, job creation can be a compelling factor in gaining financial backing.
Banks are evolving to support green startups in becoming bankable. At Absa, specialised products for green businesses have been introduced, making it easier for startups to manage their finances and establish credibility. For instance, startup accounts with zero operating costs help green businesses manage their operations without the burden of high fees. Concessionary interest rates ensure that financing remains affordable, allowing projects to stay profitable.
Furthermore, Absa’s investment banking arm is helping businesses raise capital through green bonds, which are specifically aimed at environmentally sustainable projects. Sustainability is being integrated into lending practices as well, with exclusion policies in place to prevent the financing of projects harmful to the environment. Collaborating with development finance institutions, Absa adheres to environmental, social, and governance (ESG) requirements when supporting small- and medium-sized enterprises and green projects.
Inclusive access to capital is another key aspect of this evolution. Through a partnership with the Mastercard Foundation, Absa offers collateral-free loans of up to GHS 1 million, making finance more accessible to Micro, Small and Medium Enterprises.
Young entrepreneurs must take proactive steps in their journey towards securing funding by building relationships with banks early on. This allows banks to track the growth of a business over time, creating trust. They also need to maintain a strong credit history, develop key management skills through capacity-building programs. This can provide green entrepreneurs with the tools to run successful businesses, beyond just having a good idea.
Entrepreneurs are advised to consider "patience capital" from sources willing to wait longer for returns. Crowdfunding, green bonds, government grants, and angel investors can all offer more flexible financing options, allowing businesses to grow at a sustainable pace.
The green revolution is knocking on Ghana's door, and banks are ready to support this transformation. But Ghana's green entrepreneurs must meet them halfway, demonstrating both their passion and innovation and also their business acumen.
