UNDP Indonesia's Innovative Finance for Renewable Energy in Small Coastal Island Communities | Climate Finance, Indonesia 2020

SEED Practitioner Labs Climate Finance in Indonesia engaged financial institutions, funders, intermediaries and other SME ecosystem stakeholders over a multi-step process to co-create innovative climate finance products and mechanisms that extend access to long-term financing opportunities for “missing middle” small and growing climate-smart enterprises that struggle to advance beyond the start-up stage and multiply their contributions to climate-smart and socially inclusive economies.

UNDP Indonesia's Innovative Finance for Renewable Energy in Small Coastal Island Communities builds on existing efforts to allocate funds to leverage public funding and private sector investment in clean energy which creates financially viable interconnected renewable grids, specifically developing a hybrid PV-diesel power generation system in small islands. Furthermore, creating energy demand by building a local green economy. The innovative aspect of the finance mechanism lies in the blended financing scheme. This finance solution introduces a blended financing mechanism as opposed to the current investment of RE which is often dominated by grants. The blended financing scheme consists of multiple financial actors and instruments including at the early stage of funding- guarantees provided by multilateral lenders and grants from climate funds. Then at later stage funding, channeling impact lenders and MFIs lending and private sectors, provincial banks, and state-owned enterprises for equity investment.