Can crowd funding scale up solar power?

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Published Apr 27, 2017

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Nairobi - When

Ronald Van Harten arrived in Kenya from the Netherlands in 2015

he was determined to invest in solar-powered equipment for homes

across Africa, make a profit and help the rural poor get energy.

But within two years his company EcoZoom, which sells solar

lights, radios, MP3 players and other equipment to some of

Kenya’s poorest residents, ran into financial difficulties.

The banks were not willing to lend him the capital he needed

to stay afloat and loans available from microfinance

institutions were too small.

So, like a number of new technology companies seeking to

scale up their programmes in Africa, he turned to a crowd

funding company.

“Few banks if any could finance a social investment project

dealing with people seen as high risk group, and even worse

banks are expensive and give conditions that are not easy to

meet,” he told the Thomson Reuters Foundation, referring to high

interest rates charged by banks.

TRINE, a Swedish company which raised funds for EcoZoom, has

a community of about 1 000 young investors in northern Europe

willing to each give a minimum of 25 euros ($27.14) to solar

firms which aim to help the world’s poorest.

Using crowd funding, it has raised more than 750 000 euros

($814 200) for 10 renewable energy projects since its launch

last year, said Matthew McShane, TRINE’s regional manager in

East Africa. The firm has invested in countries including Kenya,

Zambia, Uganda, Tanzania and Senegal.

Read also:  Scheme earns you an income from the sun

In Kenya, EcoZoom received 170 000 euros in February, while

160 000 euros went to Azuri East Africa, part of Azuri

Technologies. Two solar micro-grids have also received funds.

“The majority of [our] investors can invest in many other

ventures in Europe but choose to put their money in social

impact projects partly because they want to touch the lives of

the poor and partly because returns are slightly higher when

compared to ... normal investments,” McShane said.

The returns are about 6 percent, because of the perceived

higher risk associated with this market, he said.

Growing trend

Globally, crowd funding provided $2.1 billion in investment

in 2015, and investments in developing countries alone are

predicted to exceed $96 billion a year within a decade,

according to the World Bank.

It is emerging as an increasingly important means of

financing new technology at scale in rural Africa, said Azuri

Technologies CEO, Simon Bransfield-Garth.

Unlike microfinance institutions where large investors make

many small loans to firms, crowd funding allows many small

lenders to provide substantial finance to organisations with the

reach and scale to deliver significant impact, he said.

“Crowd funding is clearly no longer just for start-ups and

has the potential to provide a new class of capital for energy

access,” Bransfield-Garth said.

Azuri East Africa turned to crowd funding when it wanted to

raise cash to help its Kenyan partner, Raj Ushanga House, sell

solar panels to 1 200 homes, helping 6 000 people access

electricity.

Crowd funding is one of the most progressive and innovative

ways of raising money for projects, and relatively unexploited

in Africa, said George Wachiuri, a leading Kenyan investment

advisor and head of Optiven, a company based in Nairobi.

"It is a trend we should see grow in Africa in the future,

especially when projects impacting the poor are involved,” said

Wachiuri.

Crowd funding needs to be carried out by specialised firms

that are well versed with the concept, he added. “One needs a

good understanding of how this type of fundraising works to be

able to execute it successfully.”

TRINE conducts due diligence on a company seeking

investment, assessing its business model, supply chain, profit

margins and ability to repay, before starting to raise funds.

In East Africa, where it has helped fundraise most, the firm

is attracted by relatively high awareness about solar energy

with “mature markets”, and the availability of mobile money

platforms - such as apps - that mean consumers can easily make

payments using their mobile phones, McShane said.

"So far ... things have gone smoothly. Those we have given

money to are making their repayments on time and so far we

cannot say there is risk in funding these investments,” said

McShane. 

THOMSON REUTERS FOUNDATION

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