Loan Guarantee Fund
In 2010, GVEP started a loan guarantee fund, aiming to increase the availability of credit for small energy enterprises. GVEP’s role is to develop loan products with banks and financial institutions which reduce the default risk to the lender and the cost to the borrower. In some cases these arrangements are also being used to facilitate consumer credit arrangements. This programme is being pioneered in Kenya, Tanzania and Uganda and seeks to establish a methodology that can be applied elsewhere in the developing world. So far about 80 businesses have benefitted from these arrangements.
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. Milly Matovu applied for a loan of 2.7 million Ush (US$1,140) under the scheme. She is using the money to expand her phone charging business. Her new system enables her to charge up to 10 mobile phones a day, power four lights for her home and a small refrigerator used to chill fruit and sodas, which she sells to a local shop. Milly’s children are also benefiting, as the lights enable them to study in the evenings. Thanks to the loan, Milly earns an extra 6000-7000 Ush (US$3) a day and has almost halved her monthly kerosene expenditure.
Prometheus Fund – Renewable Energy Access in Developing Countries
GVEP has recently partnered with AlphaMundi Group a Swiss impact investment fund manager, to raise Prometheus Fund. The Fund will target investments in companies and projects utilising renewable energy technologies in sub-Saharan Africa. The Fund will target investments of €500,000 to 5 million and require investees to demonstrate not only financial viability, but also significant and measurable social and environmental impacts. It will consider opportunities to invest in generation projects such as hydroelectric and wind facilities, as well as companies which provide products to the base of the pyramid, such as solar product and cookstove manufacturers and distributors. Prometheus is a key initiative to leveraging GVEP’s donor-funded support with private sector capital to generate even more scalable impact.
Grant funding
Part of our Supporting Energy SMEs programme can include the provision of partial grant funding for certain energy enterprises, such as mini-grids. 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, project development company Calimax Ltd is setting up a micro hydro project. The company, which focuses on rural electrification, hopes the project will bring 36kW of electricity to the local community. The plant will sell and distribute electricity via a private grid to local consumers. It is hoped the electricity supply will remove the current reliance on polluting and expensive diesel and kerosene for lighting, heating, and refrigeration. Hospitals and health centres, churches, community centres and schools will also benefit from the new power source. The reliable power supply will also improve prospects for business entrepreneurs.
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