Development finance institutions (DFIs) like BII play a significant role in funding the development of power infrastructure in low- and middle-income countries. An independent review of our infrastructure portfolio showed that from 2009 to 2020, investments in the power sector made up three-fifths of our infrastructure portfolio. These investments provide millions of people with reliable access to electricity, predominantly in Africa. The review estimated that these investments contribute $9.7 billion in gross domestic product (GDP) annually. However, over 600 million people in Africa – about 40 per cent of the continent’s population – still do not have access to power, particularly in rural communities.
At BII we are also committed to tackling climate change and breaking the cycle that links economic growth to increasing emissions. We invest in energy solutions that create net zero economies and climate resilience, while also supporting inclusive economic growth in underserved communities. You can read more about this in our climate change strategy and 2022-2026 technical strategy. In 2023, we invested £449 million in climate finance, representing 37 per cent of our annual commitments.
Learning about the impact of our investments is really important to us. One of the ways we do this is through independent studies commissioned by our shareholder, the Foreign, Commonwealth & Development Office (FCDO). This latest study focuses on our 2016 investment in Virunga Energies’ hydroelectric grid in the Nord-Kivu province of the Democratic Republic of Congo. It will inform the development of our approach to power sector investments in the future. It is part of a broader evaluation to better understand the development outcomes and impacts associated with BII’s investments in the infrastructure sector.
What can we learn from Virunga Energies?
Rural communities in Nord-Kivu face severe poverty. Only 3 per cent of people living in Nord-Kivu have access to electricity, compared to 17 per cent nationally. Absent electricity infrastructure means local industry must rely on expensive diesel or charcoal made from trees illegally felled inside the Virunga National Park. Since 2013, Virunga Energies (a subsidiary of the foundation that manages the National Park) has provided clean electricity to promote socio-economic development in the region, powering local social and state infrastructure (including health centres, schools, and streetlights) for communities living in and around the park. By the end of 2023, Virunga Energies supplied electricity through its mini hydro-powered electricity grid to more than 32,000 customers.
In 2016, BII provided investment of up to $9 million to expand Virunga Energies’ existing grid and construct two further generation assets. Through this funding, the project aimed to offer reliable and affordable power to an additional 10,000–12,000 households and small and medium-sized enterprises (SMEs), as well as poorer rural households who have an average consumption below $1.90/person/day.
The study found evidence that Virunga Energies has successfully reached new customers and improved access to electricity for underserved communities in Nord-Kivu. It has added 25,856 new connections between 2017 to 2022, more than double its initial target. The study also provided evidence of how the investment has impacted connected households. All communities connected to the electricity minigrid experienced a net increase in asset wealth. This impact was strongest for communities accessing electricity for the first time, who jumped from the 79th to the 86th percentile for asset wealth among households in Nord-Kivu (at a 90 per cent confidence level). The results indicate that in 2017, asset wealth declined for the province overall, but over the following years communities connected to Virunga’s minigrid experienced a greater and faster increase in asset wealth than similar unconnected communities.
The study demonstrated that a synthetic control impact evaluation methodology using passive, AI-enabled data collection (using Atlas AI’s Asset Wealth Index and machine learning to fill data gaps) offers a novel approach that BII can use to make robust estimates of impact. The approach is most relevant to investments where there is a direct line of sight to the end user. It cannot provide a full picture of all the impacts Virunga Energies may have had on local communities: for example, it doesn’t capture reduced deforestation or improved indoor air quality from lower charcoal use. However, it does provide a quantifiable estimation of the degree to which electrification leads to improved quality of life for local people. This is central to our aim of supporting inclusive development, by reaching people living below the $6.85 per day purchasing-power-parity poverty line and in low-income and fragile countries.
The findings will also be complemented by forthcoming research by the University of Antwerp on Virunga’s impacts on economic development, security, and conservation efforts in rural and urban communities in the region.
