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The role and relevance of private banks in carbon market

The role and relevance of private banks in carbon market. West Africa Carbon Finance Investment Forum for Financial Institutions Dakar Senegal – February 12-14 2008 Dakar, Sénégal 12 – 14 February 2008. Par: Dr. NUMBEM SIMEON / OUSMANE MAHAMAT AFRILAND FIRST BANK, CAMEROON.

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The role and relevance of private banks in carbon market

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  1. The role and relevance of private banks in carbon market West Africa Carbon Finance Investment Forum for Financial Institutions Dakar Senegal – February 12-14 2008 Dakar, Sénégal 12 – 14 February 2008 Par: Dr. NUMBEM SIMEON / OUSMANE MAHAMAT AFRILAND FIRST BANK, CAMEROON

  2. PRESENTATION PLAN • Brief on Cameroon, • The rationale for private Bank involvement in Sustainable development, • The Carbon market as an added value in sustainability consideration, • Efforts by Fairland First Bank in Carbon Finance, • The Challenges in Financing carbon projects, • Our suggestions & Conclusions

  3. CAMEROON IN A NUTSHELL

  4. OU EST LE CAMEROUN?

  5. CAMEROON IN A NUTSHELL • Africa in Miniature • 10 Provinces • Population: 17.5 millions • Surface area: 475.000 km² • Political Capital: Yaoundé • Economic Capital: Douala • Currency: Franc CFA:1 EURO = 655.957 CFA • Official languages: French & English • Ethnic groups 200

  6. WHAT IS CARBON MARKET / FINANCE? • The Carbon Market today is an added value to sustainable development, • Between the « Rio Earth Summit » and the « Kyoto Protocol » Carbon emission reduction became a tool for development, • The Carbon market has come to change our outlook on sustainable environmental development, changing reluctant compliance by the private sector to positive proactive opportunities, • The Carbon market has become a catalyze for sustainable development projects such as reforestation, renewable energy, waste management, with financial, social and environmental benefits.

  7. THE RATIONALE FOR PRIVATE AFRICAN BANK INVESTMENT IN CARBON MARKET • Banks have the privileged role of mobilizing financial resources that they distribute as loans to stakeholders, • In this respect, they take risk along with other stakeholders in promoting social and economic investment project, • With the advent of climate change and sustainable development banks are better placed in enforcing environmental compliance of projects they finance, • The carbon market has created new opportunities for investment, for which Africa Banks have to take advantage, • Banks have the instruments for conducting due diligence in the projects they finance, including sustainable carbon market projects,

  8. THE CHALLENGING ROLE OF AFRICAN PRIVATE BANKS IN CARBON FINANCE • Are African private banks identifying and recognizing opportunities? • Do African private banks have the capacity and the resources to compete in the carbon market? • Sustainability and the carbon market is desirable but obviously more expensive in the short run, how are the African banks and stakeholders to manage the increased short term cost against medium and long term benefits? • Are Africa Banks operating in an optimal political environment to develop the carbon finance market?

  9. THE EXPERIENCE OF Afriland First Bank IN THE CARBON MARKET

  10. Afriland First Bank: Who are we? • A private universal bank (Commercial & Investment) • Founded in 1987 with headquarters in Yaoundé • Shareholders ( 3 groups of Cameroonians led by JULLY S. A.; SBF & CO, FMO) • From 5 to 400 employees • From 2 to 14 branches • Three affiliates in Equatorial Guinea, Sao Tomé & DRC • 3 representation offices in France, Congo Brazzaville and Beijing.

  11. HYSACAM • Corporate Name :HYSACAM • Legal Status : LLC • Head quarters : DOUALA • Implantation : Yaoundé, Douala. • Date of Creation : 1969 • Capital & Structure : XAF 2 000 millions (4.2 million USD) • : CEF 90% • : Other Cameroonians 10% • Activities • : Sweeping, Collection, transportation and treatment of household waste

  12. HYSACAM III • Project Description: Use of Methane in the landfill of Nkolfoulou (Yaoundé) and Douala as source of renewable energy capacity • Financing needed: Total 11 .45 million USD • World Bank 50% • Afriland First Bank 20% • HYSACAM 15% • Others 15% • Benefits: • Community: healthy environment, • Government: Increase in employment • Environmental: Reduction in carbon emission, • Challenges • Not enough government support, • Costly research and development

  13. GIC FAUCA • Corporate Name:GIC FAUCA • Legal Status : NGO • Head quarters: Yaoundé • Date of Creation : 2001 • Project description: Transformation of sawdust (biomass) • Product:75MW/an of electricity in the eastern province of Cameroon; by-products ethanol and heat Technology: Process of thermo cycling Project location:4 sites around sawmills in the Eastern Province

  14. GIC FAUCA II Benefits: • Community: Electricity to the local community, • Government: Provision of rural electrification, • Economic: Heat to dry wood before export, to increase wood quality • Environmental: decrease CO2 emission • Financing needed: 80.5 USD millions • Partners: 45% • World Bank: 25% • Fairland First Bank & others: 20% • Challenges • Little government support, • Poor corporate Know-how • Little to know financial resources for research and development

  15. THE ROLE OF AFRILAND FIRST BANK • Undertake financial analysis of projects to ascertain their profitability, • Act as a local bank for foreign investors in the project, • Deliver letter of Interest (LOI) to projects after a pre-evaluation, • Assist in the development of the PIN (project Idea Note) for the project, • As such we: • Become the financial adviser to the project holder, given in house capacity, • Undertake due diligence for the enterprise, where and when possible towards the project.

  16. The Challenges in Financing carbon projects in Africa • General: • Slowness in the Identification of new opportunities for carbon eligible projects, • Inadequate debate around the topic to develop policies and measures to promote investment in the direction of sustainable development, • Limited long term financial resources from Governments and financial institutions of Africa in the development of carbon market projects, • Specific • Project promoters do not often have the technical capacity to undertake the feasibility studies of their projects, • Promoters have limited and often do not have the financial resources for research and development (pre-feasibility and feasibility studies) of their projects.

  17. CONCLUSIONS & SUGGESTIONS • The carbon market is a new opportunity for the social and economic development of Africa that must be explored but, • Governments, financial institutions and project developers must also overcome the impending problem of inertia, and come together to develop more capacity through public private dialogue, • There is a need to create a pan African fund to address sustainable development generally and the Carbon market especially, • It is important for national governments and international organizations to make provisions for jumpstarting Interesting start-up carbon market projects, especially funding R & D.

  18. « KNOWING YOUR DESTINATION IS HALF THE JOURNEY DONE» PETER DRUCKER

  19. THANK YOU FOR YOUR KIND ATTENTION

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