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15th plenary meeting

The 15th plenary meeting of the Household Solar Funders Group took place on Tuesday the 25th of June, 2024.

Meeting minutes
List of participants


Update from the HSFG coordinator

HSFG coordinator Wim Jonker Klunne opened the 15th plenary meeting of the Household Solar Funders Group by welcoming all participants and introducing the agenda.

All documents, including the recordings and presentations of the current meeting, are available at the members-only section of the HSFG website. These include the membership list and members’ activity database. Wim also alerted members on the news and event listing on the home page of the HSFG website.

Matt Hague of AECF informed the meeting of the tragic passing away of Ada Marmion, the Director of Partnerships, Knowledge and Impact at the AECF. While AECF and the sector are coping with this loss, Matt will step in and take over the partnership work Ada was working on. He assured that the AECF support for the HSFG will continue and asked any member that had bilateral discussions with Ada that need follow up to contact him directly.

Wim's presentation

Audio only


Increasing the flow of capital to last mile distributors

Russell Lyseight and Davinia Cogan of the Global Distributors Collective presented their new Investment Catalyst Facility.
After a brief introduction of the GDC and sharing some characteristics of their members by Russell, Davinia introduced two of their members highlighting their financing needs (slide 3 from 03:04-04:30 in the recording and slide 4 from 04:30-05:41). Both are struggling to access finance, like most of GDC members, primarily because of the relative smaller ticket sizes needed.

The challenges the GDC sees with raising capital by their members are:

Borrower perspectives / Supply-side

  • Lack of investors providing small ticket loans ($25k -$250k).
  • Currency risk due to mismatch between revenues and loan repayments.
  • Long and inefficient fundraising process. Each investor requires something different.
  • Local lenders require specific types of collateral and, often, have high over-collateralisation rates.
  • Raising equity is near impossible. Lack of equity can impair debt-raising as D/E ratios matter to investors. (Most GDC members do not offer equity-like returns.)

Lender perspectives / Demand-side

  • Transaction costs are too high relative to ticket size.
  • There is not enough data to assess borrowers and the quality of receivables.
  • Potential borrowers may not have audited accounts and/or up-to-date management accounts.
  • Potential borrowers do not have the right systems (e.g. after-sales, credit management) in place to scale sustainably with the capital injected.
  • Must lend in hard currencies (USD, EUR, GBP); hedging is too expensive.
  • Lending to some borrowers may result in over-indebtedness.
  • Investors cannot lend in some countries due to capital controls, currency volatility and/or third-party restrictions (e.g. payment processors).

To overcome these, the GDC is setting up the “Investment Catalyst Facility”. This facility aims at addressing the following five key issues:

  1. reduce transaction costs,
  2. reduce investment management costs,
  3. reduce risks for lenders,
  4. reduce risk for borrowers, and
  5. improve internal company systems.

Davinia explained each briefly and referred to the annex to their presentation for more details on each issue (slides 12 and 13).

The Facility is a US$ 1.9m grant facility to catalyse debt investment and plug key market gaps, for which GDC is current fund raising.
They aim for 50 transactions across 40 of their members, targeting 70% locally and 40% women led companies, leveraging a total of $ 6.5m, with implementation starting 2025Q1.

The Facility can provide “eco system building” grants to increase investment readiness (pre-investment like e.g. audit, software), investment catalyst grants (to be co-designed by investor and borrower) and support to DD and investment management standardisation and innovation to support the smaller ticket sizes needed.
Next to these, grants are available to catalyse the investment itself in the form of flexible lending risks instruments (e.g. first-loss fund, subordinated debt layer), borrowing risks instruments (e.g. currency buffer fund) and a transaction costs grant at disbursement (e.g. DD subsidy for the investor).

Davinia explained how the Facility could support investment into the two companies introduced earlier. For the first company details can be found in slide 8 (11:49–13:57), while the second is given in slide 9 (14:11–16:00).

GDC's presentation

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Bridging the valley of death, how to transition from grants to follow-on investment

This part of the meeting delved deeper into the so-called “Valley of Death”, the gap that entrepreneurs experiencing when they want to grow their company from benefitting from grants to debt and equity investment by investors. This gap between grant providers and follow-on investors has been discussed at several meetings of the Household Solar Funders Group. We have also seen that there is a genuine interest from both sides to close this gap and that some HSFG members from both sides have been / are working much closer together.

The session saw a panel discussion with local African solar entrepreneurs Alem Gebru (Modify Ethiopia) and William Ponela (Zonful Zimbabwe).
After a brief introduction of the entrepreneurs and their businesses, the panellists explained their funding journey from grants to (trying to) attract follow on investors.
Both countries have their own challenges: Ethiopia primarily on foreign exchange controls and legislation that prohibit international financiers to provide equity to importers. Zimbabwe to a lesser extend on forex but is more exposed to political risk. During the discussion it was mentioned that Nigeria and Malawi are facing similar challenges towards foreign currency investments into local companies.

Both entrepreneurs have been able to grow their business through grants from a number of grant providers / HSFG members, and have received finance readiness training from a/o AECF, GOGLA, GSMA and others.
While Zonful in Zimbabwe was severely hit by the COVID associated lock downs, which also resulted in the cancelling of a nearly concluded debt agreement, they have been able to bring the company back to a level that William sees as investable.

Alem’s business has only started to look for investments after the COVID crisis and has tried to embark on local assembly to qualify for foreign investments.

Both are experiencing serious problems accessing finance and feel that the criteria put forward by investors are too stringent to come to a positive conclusion.
Particular William felt that they do every effort possible to provide investors with required information, but experienced that they might not even get feedback from the investor on an investment decision and feel “ghosted” by them. In general, he requested any financier to provide feedback on their submissions as without that it is extremely difficult for an entrepreneur to understand how (s)he can do better next time.

In the view of the entrepreneurs, current grant provision without sight on follow-on investment is creating a serious problem for the development of the market. It results in a situation where a substantial number of grant recipients cease to operate when the grant funding ends, with very little companies growing to a stage where they can stand on their own feet. They can only see this changing when grant providers will be able to secure follow-on investment for those companies that have been successful during the grant stage (either through their own structures or by teaming up with follow-on investors at a very early stage).

In parallel to this more mentorships and coaching during the investment process could make a positive impact on the companies and their funding journey.

During the discussion Hannah Mottram of the Energy Savings Trust / Efficiency for Access informed the meeting of a research project they have started, looking at this gap between grants and follow-on finance and how grants can be structured better access other types of finance. They are currently at the early stage of this project but will reach out to the HSFG and individual members in due course.

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Claire Nelson of GOGLA presented on the upcoming Global Off-Grid Solar Forum and Expo (GOGSFE), which will be held in Nairobi from 8 - 10 October.
The event is co-hosted by GOGLA, the Government of Kenya and the World Bank’s Lighting Global Program and will be held at the Kenyatta International Conference Centre.
This year GOGLA is collaborating with AMDA (mini grids), GDC (last mile distributors) and AfEMA (electric mobility) for the content.

The programme will have four main tracks:

  1. policy and enabling environment
  2. investment and financing
  3. business models and innovation
  4. Productive Use of Energy

There will also be specific sessions focussing on electrifying public institutions like health facilities, schools and other facilities.
In follow up on a dedicated conference on humanitarian energy on Monday the conference will have also sessions covering this area.

GOGLA will use the event to host a dedicated meeting of the Community of Champions on the Monday, bringing in about 100 government officials from the energy, agriculture and health sectors from across Africa.

The Household Solar Funders Group is currently working with GOGLA to see how we can have a dedicated in-person meeting for our Group at the sides of the main conference.

Details of the Forum and registration at https://www.offgridsolarforum.org/

Audio only