As well as providing technical assistance and support to energy businesses, GVEP also provides assistance with accessing to capital to support construction of projects and for business growth.
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, and that, in various ways, we can make a contribution to help mobilise that private capital.
These include:
provision of loan guarantees for lenders to small businesses;
equity capital from Prometheus Fund, an impact investment fund focused on renewable energy and energy access in East Africa;
seed 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.
In 2009 GVEP started a small loan guarantee programme to increase the access to finance for energy businesses by linking them to financial institutions thus reducing the default risk to the lender and the cost to the borrower. The fund also stimulated consumer product demand through end-user consumer financing initiatives.
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 100 businesses have benefitted from these arrangements and more will have further access to finance thanks to a grant received in 2012 by the Vitol Foundation. Access to capital for energy businesses will be significantly extended as part of our CARE2 programme with the Swedish International Development Cooperation Agency (Sida).
Wekembe SACCO is a cooperative savings and credit society promoting renewable energy in Uganda. GVEP has provided Wekembe SACCO with a partial guarantee for loans to 15 small energy enterprises. By October 2010, six entrepreneurs had accessed loans from Wekembe SACCO to develop their energy businesses. 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.
Our ESME programme includes the provision of partial grant funding for certain energy entrepreneurs such as mini-grids and solar product suppliers. In these cases, the balance of the capital requirement is due from private sources. With quality advice to ensure the associated business plan is robust, the objective is to minimise the proportion of grant money in the overall capital mix, consistent with allowing adequate returns to the private capital.
On 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.
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