Mixed Models Transforming Sustainable Finance in Africa
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Africa’s Energy Transition: The Rise of Hybrid Finance
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The climate financing gap is vrey pronounced in Africa. According to the African Advancement Bank (AfDB), the continent only receives $30 billion out of the $300 billion needed each year.
Hybrid finance is redefining Africa’s energy sector as traditional private equity acquisitions decline, but “clean investments” continue to rise. During the first nine months of 2025,the African private equity market recorded 114 acquisition transactions worth $618 million,according to the “DealMakers AFRICA Q3 2025” report.
While this 33% drop from the peak of 326 transactions in 2022 might suggest a clear slowdown, it only tells part of the picture. Indeed, DealMakers AFRICA focuses strictly on private equity acquisition activity, excluding venture capital, private debt, infrastructure equity, mezzanine financing and capital raising. In contrast, the African Private Capital Association (AVCA) tracks the entire private capital spectrum, frequently enough reporting more than 300 deals over the same period.
In reality, private equity acquisitions and expansions have slowed, while other segments of private capital – notably energy, infrastructure and debt – remain resilient or even expanding.This distinction is essential to understand why the numbers do not fully reflect the transformations that are occurring.
Beneath these modest private equity figures lies a powerful and discreet reconfiguration of how Africa finances its transition to clean energy. The continent is seeing rapid growth in hybrid financing models that combine commercial banks, development finance institutions and private equity to amplify renewable energy solutions.
One of the most illustrative examples of this new paradigm is the $156 million securitization of sun King,announced on july 28,2025 in Kenya. It is indeed the largest fee-for-service (PAYG) solar securitization outside of South Africa.
Understanding the Shift: Why Hybrid Finance?
The traditional model of relying solely on private equity for energy investments in Africa has faced challenges. These include perceived risk,limited deal sizes,and the long-term nature of infrastructure projects. Hybrid finance addresses these issues by diversifying funding sources and mitigating risk.Here’s a breakdown of the key components:
- Commercial Banks: Provide debt financing, often secured by predictable cash flows from energy projects.
- Development Finance Institutions (DFIs): Offer concessional loans, guarantees, and technical assistance to de-risk projects and attract private capital. Examples include the World Bank, AfDB, and various regional DFIs.
- Private Equity: contributes equity investment, providing crucial capital for project development and growth.
The Sun king Securitization: A Case study
The $156 million securitization of Sun