How Benin’s financing shift is reshaping the national conversation
Benin’s economic transformation has moved into a new phase, and it is sparking reactions well beyond the finance ministry. With growth reaching 8.1% in 2025 and forecasts still pointing upward, the country faces a practical question that is now openly debated: how will it pay for the next stage of its development? The answer being tested on the ground involves sustainable finance instruments — SDG bonds, green finance, climate finance and blended finance — and each one is generating its own set of expectations and concerns.
A transforming economy needs capital sustained over many years. According to the African Development Bank, Benin must mobilise around $2.43 billion per year through 2030 to accelerate its structural transformation. Roads, energy, factories, agricultural enterprises, digital services and water infrastructure all require substantial investment, and they cannot all be financed the same way.
Public funds remain essential, but they cannot carry the entire load. Banks, private investors, financial markets and development partners all have a role to play. The debate now centres on how to channel these different resources toward the projects that matter most for Benin’s economy.
The experiments already underway
Benin has been testing sustainable financing models for several years. The first major signal came in 2021, when the country issued €500 million in SDG bonds. The proceeds were earmarked exclusively for expenditures contributing to the Sustainable Development Goals, making Benin the first African state to carry out an international SDG Eurobond issuance in July 2021.
In June 2023, the government deepened this approach with a €350 million mobilisation from Deutsche Bank to fund SDG-sensitive spending. These operations demonstrated that a portion of market-raised financing can be directly tied to precise development objectives.
The country then widened its scope to green finance. In September 2025, the government launched its Green Finance Framework, which identifies projects eligible for green funding. Renewable energy, clean transport, water management, biodiversity, energy efficiency and climate change adaptation are among the targeted sectors.
Another workstream concerns the climate taxonomy. The concept may sound technical, but the idea is straightforward: defining criteria to determine which economic activities qualify as favourable to the climate transition. The IMF indicates that Benin has finalised the structure, methodology and governance rules for this taxonomy, with criteria already set for sectors including energy, agriculture, waste and forests. Two decrees formalised this work in January 2026.
These various initiatives show that sustainable financing is no longer a novelty for Benin. The country already has several experiences it can build on.
Bringing private capital into the picture
The next question is private investment. Benin’s needs are significant, and public resources alone cannot cover every necessary project. But attracting a private investor is not always simple. Some projects are useful for the population and the economy yet carry substantial risk or require several years before becoming profitable.
This is where blended finance becomes useful. Its principle is to combine public resources or development partner contributions with private capital. These initial resources can help reduce certain risks and make a project more attractive to investors.
Benin is already moving in this direction. The African Development Bank, the Climate Investment Funds and Canada Climate Action are supporting the creation of the Benin Green Investments Vehicle. This mechanism aims to mobilise financing for the private sector and support investments linked to the green transition.
Other actions are aligned. With backing from the World Bank, the Global Green Growth Institute and BOAD, Benin is working on a platform to facilitate access for banks and microfinance institutions to climate financing. The goal is notably to encourage long-term investment by small and medium-sized enterprises.
This issue is critical. A company wanting to install solar equipment, reduce its energy consumption or adapt its activities to climate effects must be able to access suitable resources. Sustainable finance should not remain limited to large operations on international markets. It must also reach the businesses that produce, invest and create jobs in Benin.
Climate finance as a development lever
Climate change adds another dimension to financing needs. Benin must continue investing in its economy while protecting its infrastructure, agriculture, water resources and activities against climate risks.
The government has taken several actions in this area. In July 2024, it organised a roundtable in Cotonou with the World Bank and the IMF dedicated to climate financing. This led to a cooperation framework bringing together the government, the World Bank, the AfDB, the Asian Infrastructure Investment Bank and the OPEC Fund.
The objective is to better coordinate reforms and mobilise more public and private financing for the country’s climate priorities. Tools under consideration include green bonds, blended finance and mechanisms under Article 6 of the Paris Agreement. The OPEC Fund has announced a €30 million commitment in this context.
Climate financing concerns very concrete sectors. It can serve to develop renewable energy, strengthen water management, improve agricultural resilience or support businesses seeking to reduce their energy consumption.
The government has also advanced on managing climate risks in agriculture. According to the IMF, a national agricultural insurance scheme was established after a pilot phase that benefited more than 100,000 rice, cotton and livestock producers. The scheme is to be gradually extended to other productions and to around 200,000 farmers. These examples show that climate finance can go well beyond large infrastructure projects. It can also help protect incomes, support businesses and reduce the risks facing producers.
What the debate reveals about the road ahead
Benin now has several tools at its disposal. SDG bonds link financing to development objectives. Green finance helps steer resources toward environmental projects. The climate taxonomy gives investors reference points. Blended finance seeks to attract more private capital. Climate financing mechanisms can help address risks related to climate change.
The next step will be to make these tools work better together and, above all, to use them to finance more projects. That is where a significant part of the debate now lies. The issue is no longer just finding funds. It is also about knowing which financing suits each project, how to share risks and how to ensure that mobilised resources deliver the expected results.
Benin has already begun this evolution. The next stage will be scaling up — ensuring that new sustainable finance tools are not limited to a few operations but contribute more substantially to financing businesses, infrastructure, employment and the ecological transition.
Growth creates momentum. How the country mobilises and directs capital in the coming years will help determine whether that growth can produce more value, reduce extreme poverty — one of the government’s priorities — and accelerate sustainable development.
Tayon Ulrich Lavinon is an agro-economist and consultant in sustainable development, communication for development, knowledge management and partnerships.