Every day, billions of shillings move through Africa’s financial system, looking for places where they can be put to work. Banks decide which businesses are worth lending to, pension trustees weigh where workers’ savings can earn a return, insurers and asset managers assess opportunities, while development and concessional funders step in where markets are still too young, too risky or too uncertain for commercial capital.
Clean cooking sits within this much wider financial system, where it must compete with other sectors for the attention and capital of investors
The International Energy Agency estimates that around USD 4 billion in investment is required every year to close Africa’s clean-cooking access gap.
The conversation around clean cooking finance in Africa has largely focused on where additional finance can be found. After listening recently to a discussion on domestic finance for clean cooking and carbon markets, I came away thinking that the sector needs to spend much more time on another question: what would make clean cooking easier for existing African capital to finance?
Lucy Nyoike of FSD Africa brought the issue into sharper focus by pointing to the scale of capital already sitting within African financial systems, and Kenya offers a useful illustration of what she meant.
By the end of 2025, Kenya’s pension industry was managing KSh 2.81 trillion, with about KSh 1.47 trillion invested in government securities. Even one per cent of that total pension pool would amount to roughly KSh 28 billion, a figure that puts into perspective the size of the domestic capital already being managed within the country.
But this does not mean pension funds can simply redirect a share of their portfolios into clean cooking. They operate within investment mandates, regulatory requirements and fiduciary obligations .What the figures do show, however, is that clean cooking is not operating in a financial system without capital; it is trying to become investable within one where large pools of domestic money are already being allocated every day and this changes the financing conversation in an important way.
The question is what has to happen between capital being available within the financial system and a financial institution being willing and able to put it into a clean-cooking business. For the sector, that means understanding how its businesses become opportunities that banks, pension funds and other investors can realistically evaluate, price and finance. One place to start is with the relationship between the kind of business seeking finance and the kind of capital it is trying to attract.
Capital has to meet a business at the right stage
As clean-cooking companies grow, their financing needs change with them. A manufacturer expanding production may need working capital to buy materials and keep enough stock to meet demand, while a distributor entering new counties or countries may need finance to build out its network. A company selling products through instalment payments faces a different challenge, requiring capital that can bridge the period between making a sale and receiving the full customer payment, while an early-stage enterprise may be better suited to an equity investor willing to stay for several years as the business establishes its market.
Each of those businesses is asking finance to perform a different job, and the institutions providing that finance are working within their own constraints. Commercial banks need confidence that a loan can be repaid, institutional investors typically have expectations around transaction size, risk, liquidity and return, while development, concessional and philanthropic capital can take on roles that commercial finance may not yet be ready to play.
This is where the financing challenge becomes apparent because a promising business can still struggle to raise capital simply because the financing it is seeking does not fit its stage of growth, its size or the requirements of the institution it is approaching. A young company may not yet have the transaction history a bank requires, while a growing business may need an amount too small to interest a large institutional investor. Another may be looking for debt when patient equity would give it a stronger foundation for expansion.
Financing clean cooking therefore begins with more than identifying businesses that need money. It requires understanding what kind of capital fits the business, which institutions are able to provide it and whether the two are meeting at the right stage.
Even when that match is right, however, another hurdle remains. A financial institution still has to understand the business well enough to make a decision, which means the company must be able to explain its commercial proposition in a form that can withstand the questions, calculations and internal processes behind an investment decision.
Bankability is built in the details
Once a business reaches the right kind of financier, the next task is giving that institution enough information to understand what it is being asked to finance and how the money is expected to come back. This requires translating the business into the commercial and financial information that sits behind a lending or investment decision.
Clean-cooking companies operate in a sector with clear social and development value. Cleaner cooking technologies affect health, household expenditure, women’s time, environmental pressure and climate emissions, which helps explain the attention the sector receives from governments and development institutions. A financing decision then requires a closer understanding of how the individual business works in practice.
A lender needs to know what the company sells, what it costs to produce and distribute its products, how strong demand is, how revenues are generated, which risks could interrupt those revenues and where repayment will come from over the life of a loan. These details allow a credit team to build a picture of how the business is likely to perform once financing has been provided.
Olasunkanmi Abioye of Sterling Bank raised this during the same discussion, observing that clean-cooking developers may understand their businesses in considerable technical detail and face difficulty presenting the commercial proposition in the form a financier needs to assess it.
That becomes particularly important for companies drawing income from several sources. A clean-cooking business may earn revenue from stove sales, instalment payments and carbon credits, with each stream arriving on a different timetable and carrying its own risks. A credit team therefore needs to understand when that income is expected, how dependable it has been, how slower sales or delayed carbon payments would affect cash flow, and whether the company would remain able to meet its obligations through those periods.
This is the practical work behind bankability, and it brings the financial institution more clearly into the picture, because the information a business presents still has to be interpreted, assessed and carried through an institution’s own decision-making processes. That requires people inside those institutions who understand how to work with the transactions reaching them.
Financial institutions need transactions of their own
African banks and other financial institutions have spent years participating in sustainable-finance programmes, climate-finance workshops and capacity-building initiatives that have expanded knowledge of climate-related sectors and strengthened understanding of green finance.
Nyoike’s observation during the discussion was that the next capacity challenge is increasingly emerging at transaction level, where relationship managers need to know how to take clean-cooking deals through internal processes, credit teams need experience assessing the risks, senior decision-makers need precedents they can examine, and institutions need evidence showing how borrowers perform once financing has been provided.
That knowledge develops through transactions. When a bank finances a clean-cooking company, it begins to see how its assumptions perform in practice, which revenue streams remain dependable, how customers behave, where repayments come from and which risks emerge over the life of the facility, with each transaction adding to the knowledge available when the next financing decision reaches the institution.
As that experience accumulates, institutions begin to build a body of knowledge around how clean-cooking businesses perform financially, giving credit teams precedents to work from and creating greater familiarity with the sector inside the institution.
Building the infrastructure for clean cooking finance in Africa
Africa’s clean-cooking financing gap remains wide, and closing it will require more capital alongside stronger pathways for that capital to reach viable businesses.
That means better-prepared businesses, clearer financial information and a deeper body of transaction experience within financial institutions. Over time, those elements can make financing decisions easier to repeat and help build a market with a stronger track record.
The clean-cooking sector has spent years making the case for why it deserves investment. The next phase is about building the financial architecture that allows more of those investments to happen, and to happen more routinely.
So what would it take for financing credible clean-cooking businesses in Africa to become a normal part of how the market works?