Access to finance

Pico hydro under construction

As well as providing technical assistance and support to energy businesses, GVEP also assists with accessing capital for developing and constructing projects, and for starting and growing businesses. 

In the developing world, the lack of access to capital is a key issue holding back the progress of small businesses –including in the energy sector. 

At GVEP we believe that private capital is fundamentally the right solution, although there will frequently be an important role for public funding to catalyse and underpin private investment.  In various ways GVEP can help to design and implement the right private or public/private capital solution.

These include:

  • support from our Advisory Team on capital structures, sources of capital and and how to approach them;

  • provision of loan guarantees for lenders to small businesses;

  • introductions to equity capital and debt capital providers known to us in our network;

  • capital grants, where justified, to underpin the economics for private capital;

  • training of financial institutions to improve their knowledge of, and appetite for the small business energy sector. 

Our training programmes have so far served around 50 local financial institutions in East Africa.  

Loan Guarantee Fund

GVEP operates a small loan guarantee programme to support lending by local financial institutions to small businesses. Under the scheme, GVEP takes some of the default risk on loans to small energy businesses that we believe are worthwhile, in order to increase availability of loans at improved rates. So far, the scheme has been used mainly for very small businesses, to help with the financing of equipment purchases, inventories or end-user consumer credit. 

Funding from USAID and support from the Garfield Weston Foundation, Jump Up and Barclays Bank allowed GVEP to set up the fund and to work with microfinance institutions to develop loan products for energy enterprises. It was pioneered in Kenya, Tanzania and Uganda, and sought to establish a methodology that could be applied elsewhere in the developing world. So far around 135 businesses have benefitted from these arrangements and further funding to support expansion of the schemehas beed provided by the Vitol Foundation.  A further development of the scheme, to allow it to support larger loans to md-sized businesses and projects, is currently in the design phase as part of our CARE2 programme

 

How loan guarantees can stimulate small energy enterprises


Caleb Joseph Ochere is the owner of Lakenet Energy Solutions. The business, based in the market area of Kisumu in West Kenya, specialises in the manufacturing of improved cookstoves (ICS) and the fabrication of tools and equipment for ICS liner production. In March 2013 with support from GVEP’s Loan Guarantee Fund programme he obtained a loan of USD$1,200 from Ecobank. This was his first loan since starting his business in 1986. 

Caleb used the loan to buy raw materials to scale up his business production. As a result, his business saw a 200% increase in average monthly sales, creating a need for more staff which lead to Caleb employing 4 permanent employees - up from 1 part time casual employee since the previous year 

“Being able to open an account with a big bank and to obtain a loan has been a real gratifying experience. It makes me proud to be able to meet my loan repayments promptly and save more regularly. The bank regards me as a good customer and this further increase my motivation to do better,” said Caleb.

The loan has changed Joseph’s family life. With an increased income from the business, he is now able to pay school fees for his 5 children. Furthermore he has been able to build a house for himself and his family. Caleb’s monthly savings into his Ecobank account will earn him the right to use them as a guarantee in securing another, larger, loan in the future. His expansions plan include purchasing modern production tools and machines for manufacturing new stove designs, and acquiring land for construction of a more spacious production centre this year.
 

Do you have an energy business or a business concept? Is your project based in East Africa? If you do then please fill out the Submit your business concept form to help us identify ways we may be able to support you.

Grant funding

Some of GVEP’s programmes  include the provision of modest grants to renewable energy businesses whose profile fits with the objective of that specific programme. For example:

- Our ESME programme includes the provision of partial grant funding in Senegal, Tanzania, Rwanda and Kenya for certain energy entrepreneurs such as small hydro project developers and solar product suppliers. Some of this sourced by specific targeted calls for proposals, for example in June we invited proposals from off grid lighting companies in Kenya

- IDEAS Energy Contest provides grants of up to $200k to innovative renewable energy projects in the Caribbean.

- The Kenya Climate Innovation Centre provides proof of concept grants for young Kenyan businesses targeting climate mitigation or adaptation technologies.

Grant funding from GVEP programmes will nearly always be combined with an engagement with GVEP to provide supporting advice - as well as grant monitoring – usually with the objective of readying the client business for follow-on private investment. At any given moment the availability of grant funding through GVEP will depend on the status and objectives of individual programmes. However, we are happy to receive enquiries on this at any time. We are also familiar with other sources of grant funding, and may be able to advise accordingly.

Supporting micro-hydro expansion in Rwanda


Rubagabaga river in RwandaOn the Rubagabaga River in Rwanda’s Western Province, local project development company C.E.E.P. Ltd is setting up a micro-hydro project. The company, which focuses on rural electrification, hopes the project will bring around 300kW of electricity to the national grid which is in urgent need of more electricity supply.

Being placed at the end of a current grid expansion, it will help to balance the load of the grid and provide better service to connected households in the area. Reliable power supply will enhance livelihoods in the area and also improve prospects for business entrepreneurs to make use of the new possibilities. 

GVEP has helped C.E.E.P. Ltd in several ways. With initial grant funding generously provided by Barclays Bank, a feasibility study was conducted and GVEP helped in the development of the financial model and structuring. We have continued to support the company, advising on financial issues and structuring around the project together with the investors and other partners involved in the project.