Benin’s economic transformation has moved beyond the drawing board, but the way it is being financed is now fueling a broader public conversation. With growth of 8.1% in 2025 and solid prospects, the country still needs far more capital to sustain its momentum. The response so far has been a mix of SDG bonds, green finance, climate finance and blended finance — and that mix is drawing both praise and questions about what comes next.
The fallout of a fast-growing economy that needs capital
A transforming economy requires capital over many years. According to the African Development Bank, Benin will need to mobilize around $2.43 billion per year through 2030 to accelerate its structural transformation. Roads, energy, factories, agricultural enterprises, digital services and water infrastructure all demand significant investment. Not all of them can be financed the same way.
Public funds remain essential, but they cannot cover everything. Banks, private investors, financial markets and development partners also have a role to play. The question now is how to channel these different resources toward the projects that matter for Benin’s economy.
Benin has already begun answering that question. In recent years, the country has tested several forms of sustainable financing. It has also launched reforms aimed at directing capital toward development and climate-related investments.
How Benin diversified its funding sources
The first signal came in 2021. Benin issued €500 million in SDG bonds. The operation had a specific feature: the funds raised were earmarked exclusively for spending that contributes to the Sustainable Development Goals. In July 2021, Benin became the first African state to carry out an international SDG Eurobond issuance.
In June 2023, Benin continued this approach with a €350 million mobilization from Deutsche Bank to finance spending with strong SDG sensitivity. These operations show that it is possible to link part of the funding raised on markets directly to precise development objectives.
The country then broadened its approach to green finance. In September 2025, the government launched its Green Financing Framework. This framework makes it possible to identify projects eligible for green financing. Renewable energy, clean transport, water management, biodiversity, energy efficiency and climate change adaptation are among the sectors concerned.
Another workstream concerns the climate taxonomy. The word may sound complicated, but the idea is simple: defining criteria to determine which economic activities can be considered favorable to the climate transition.
The IMF indicates that Benin has finalized the structure, method and governance rules of this taxonomy. Criteria have already been defined for several sectors, including energy, agriculture, waste and forests. Two decrees made this work official in January 2026.
These different workstreams show that sustainable financing is no longer a new idea for Benin. The country already has several experiences it can build on.
Giving private capital a bigger role
The next question is private investment. The country’s needs are large, and public resources alone cannot cover all the necessary projects. But attracting a private investor is not always simple. Some projects are useful for the population and the economy but carry significant risks or take several years to become profitable.
This is where blended finance can help. Its principle is to combine public resources or funding from development partners with private capital. These initial resources can help reduce certain risks and make a project more attractive to investors.
Benin is already working in this direction. The African Development Bank, the Climate Investment Funds and Canada Climate Action are supporting the setup of the Benin Green Investments Vehicle. This mechanism is intended to help mobilize financing for the private sector and support investments linked to the green transition.
Other actions point the same way. With support from the World Bank, the Global Green Growth Institute and the West African Development Bank (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 investments by small and medium-sized enterprises.
This issue is essential. A company that wants to install solar equipment, reduce its energy consumption or adapt its activities to the effects of climate change 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.
Making climate finance 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 organized a roundtable in Cotonou with the World Bank and the IMF dedicated to climate finance. This process then led to a cooperation framework bringing together the government, the World Bank, the AfDB, the Asian Infrastructure Investment Bank and the OPEC Fund.
The goal is to better coordinate reforms and mobilize more public and private financing for the country’s climate priorities. Among the tools under consideration are green bonds, blended finance and mechanisms under Article 6 of the Paris Agreement. The OPEC Fund has notably announced a €30 million commitment in this framework.
Climate finance concerns very concrete sectors. It can help develop renewable energy, strengthen water management, improve agricultural resilience or support businesses that want to reduce their energy consumption.
The government has also made progress 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 faced by producers.
What comes next for Benin’s financing strategy
Benin now has several tools at its disposal. SDG bonds link financing to development objectives. Green finance helps direct resources toward environmental projects. The climate taxonomy gives investors benchmarks. Blended finance seeks to attract more private capital. Climate finance mechanisms, meanwhile, 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 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 the resources mobilized produce the expected results.
Benin has already begun this evolution. The next stage will be scaling up — ensuring that new sustainable financing tools are not limited to a few operations but contribute more to financing businesses, infrastructure, employment and the ecological transition.
Growth creates momentum. How the country mobilizes and directs capital in the coming years will help determine the ability of that growth to produce more value, reduce extreme poverty — one of the government’s priorities — and accelerate sustainable development.
Tayon Ulrich LAVINON
Agro-economist and sustainable development consultant, communication for development, knowledge management and partnerships.