Promoting the provision of natural disaster-backed loans through BOAD in West Africa

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In the West African Economic and Monetary Union (UEMOA), the need for investment in climate protection and climate adaptation projects is high in view of the increasing impacts of climate change on the region. However, the available financing for investments of this kind is not sufficient to meet demand. In addition, developing countries need additional financial support from the international community quickly in the event of natural disasters, but this support is often delayed and insufficient. The affected countries are then forced to reallocate budgets for emergency aid and reconstruction measures from other areas (such as social infrastructure) or to make spending cuts. The FC project Promoting the provision of loans secured against natural disasters by the BOAD in West Africa starts precisely here. The project aims to finance climate protection and climate adaptation investments in the UEMOA member states using loans secured against natural disasters (Shock Resilient Loans, SRL) from the West African Development Bank (BOAD). The intermediaries to the target group are the governments of the UEMOA member states, which receive loans secured against natural disasters for climate protection and climate adaptation investments through the BOAD. The target group is the (poor) population of the respective UEMOA member state, which is affected by natural disasters and thus benefits from climate protection and climate adaptation investments and, in the event of a natural disaster, from emergency aid and reconstruction measures. The basic concept of the SRL can be described as follows: The BOAD issues low-interest loans to the governments of its member states to finance climate protection and climate adaptation projects. At the same time, the BOAD takes out an insurance contract with an insurance company that insures the capital service (interest and repayment) of the SRL against climate risks. In the event of a natural disaster, the BOAD receives the insurance benefit and in return waives the capital service of the affected member state in the same amount. The resulting financial leeway in the state budget of the UEMOA member states is to be used for emergency aid and reconstruction measures to mitigate the effects of the natural disaster on the population.