The joint programme is expected to start in April 2022, after the completion of the design and pre-feasibility phase in 2021.
More than 60% of North Macedonia's electricity is generated by coal, with very limited use of renewable and efficient energy. Because of this, North Macedonia, and its capital of Skopje, has some of the highest pollution in Europe - in 2018, Skopje's air pollution of 40 μg/m3 was 60% higher than EU guidelines, and four times the level recommended by the WHO. Climate change will only exacerbate this problem, necessitating the adoption of renewable energy and energy efficiency retrofitting of homes and businesses.
By providing both underserved households and businesses with financing to install renewable and efficient energy technology, the Green financing facility aims to increase North Macedonia's renewable energy generation by 10.7 MW over four years. The programme is anticipated to extend loans to 105 businesses and 650 households, ultimately leading to 80,000 tonnes of greenhouse gas emissions avoided and 86,000 MWh of energy saved.
The US$ 44.4 million Green Financing Facility will support loans to households and small businesses to adopt renewable and efficient energy technologies. To incentivize businesses and households to take advantage of the loans supported by the facility, it will also offer technical assistance and performance based payments. The loans will be disbursed to households and businesses through local banks, and women, and single parent led households will be prioritized, alongside households that receive remittances or contain returning migrants.
To best serve both households and businesses, the facility will use a slightly different structure for each. For businesses, the facility will provide a US$ 31.4 million credit line to local banks, which will in turn lend to businesses at a target IRR of 3 - 5% with tenors of up to 10 years. The facility will also provide US$ 3.9 million in technical assistance and performance based payments. The PBPs to small businesses will be up to 10% of the amount of the original loan. For households, the facility will provide US$ 6.5 million in loans through local banks, with an expected IRR of 5 - 6% and an expected tenor of up to 7 years. This will be complemented by performance based payments equal to up to 30% of the original loan amount.