Charm Impact & CLASP Supporting Local Early-Stage African Renewable Energy Entrepreneurs Through a New Financing Facility
With support from the IKEA Foundation, CLASP is collaborating with Charm Impact to pilot a new financing facility for early-stage, locally owned, renewable energy companies on the African continent. The Supporting Early-Stage Local Entrepreneurs (SESLE) Program promotes inclusive finance by investing in local companies, which are often challenged to access the capital they need to grow their renewable energy businesses. SESLE de-risks loans for investors and helps borrowers hedge against volatile currency fluctuations.
Locally-owned companies are key drivers of the renewable energy transition. Despite their potential, financing to help them expand operations and reach more customers is critically insufficient, with investors often perceiving them as too risky. Funding overwhelmingly goes to foreign-owned companies. Often, the ticket size of available micro-financing is too small to be useful for entrepreneurs. At the same time, local commercial banks are unwilling to lend to startups or carry prohibitive collateral requirements and charge exceptionally high annual interest rates.
Charm Impact has developed a unique approach to tackling the financial exclusion of local entrepreneurs. Using its credit risk and impact assessment tool, Charm supports companies in establishing a commercial credit history. This enables entrepreneurs to scale their operations, prove their creditworthiness and access capital from later-stage investors. Adding to this effort, SESLE’s blended finance approach offers a pathway for increasing financial flows to these local companies.
“Blended finance is typically only looked at through the lens of supporting investors,” says Gavriel Landau, CEO and Founder of Charm Impact. “With SESLE, we have flipped this paradigm on its head and created an innovative instrument that caters to investors and entrepreneurs. One component of SESLE de-risks loans for investors by guaranteeing a portion of their investments. While the other supports entrepreneurs by absorbing some of their potential losses in the event of currency depreciation.”
Locally-owned energy access companies are desperately needed to create competition in the marketplace, reach underserved geographies and cater to last-mile customers to boost progress towards United Nations Sustainable Development Goal 7. Without the commercial funding to enable these companies to grow, it will be impossible to achieve the SDG7 targets.
“Energy access for all is possible. SESLE can help accomplish this by offering an innovative new funding facility that creates an equitable investment ecosystem and supports locally owned companies that are fundamentally being left behind”, says Siena Hacker, a Senior Program Associate at CLASP.
SESLE has demonstrated early traction by already incentivizing investment in three locally owned companies across Rwanda, Nigeria and Kenya. After demonstrating the pilot’s success, SESLE will aim to expand its reach and ensure that local entrepreneurs across Africa can climb the credit ladder, illustrate the success of their customer-centric businesses and enhance the growth of the energy access industry.
Jeffrey Prins, Head of Portfolio, Renewable Energy at IKEA Foundation, says, “We have partnered with CLASP and Charm Impact to give locally owned, renewable energy companies on the African continent the means to scale their high-impact businesses. This will help boost the local renewable energy markets, reduce greenhouse gas emissions and enable many families on the continent to access renewable energy products that would otherwise be unattainable.”
About the IKEA Foundation
The IKEA Foundation is a strategic philanthropy that focuses its grant-making efforts on tackling the two biggest threats to children’s futures: poverty and climate change. It currently grants more than €200 million per year to help improve family incomes and quality of life while protecting the planet from climate change. Since 2009, the IKEA Foundation has granted more than €1.5 billion to create a better future for children and their families. In 2021 the Board of the IKEA Foundation decided to make an additional €1 billion available over the next five years to accelerate the reduction of Greenhouse Gas emissions. Learn more at: www.ikeafoundation.org or by following them on LinkedIn or Twitter.
CLASP serves at the epicenter of collaborative, ambitious efforts to mitigate climate change and expand access to clean energy through appliance energy performance and quality.
About Charm Impact
Charm Impact’s mission is to combat the financial exclusion of clean energy entrepreneurs across Sub-Saharan Africa.
Charm has provided 27 loans across Nigeria, Kenya, Malawi, Rwanda, Zimbabwe, Tanzania and India with a combined value of £2m, improving energy for more than 350,000 people. To date, Charm maintains no defaults across its portfolio and has had 11 loans fully repaid.