Nairobi - When
Ronald Van Harten arrived in Kenya from the Netherlands in 2015
he was determined to invest in solar-powered equipment for homes
across Africa, make a profit and help the rural poor get energy.
But within two years his company EcoZoom, which sells solar
lights, radios, MP3 players and other equipment to some of
Kenya’s poorest residents, ran into financial difficulties.
The banks were not willing to lend him the capital he needed
to stay afloat and loans available from microfinance
institutions were too small.
So, like a number of new technology companies seeking to
scale up their programmes in Africa, he turned to a crowd
funding company.
“Few banks if any could finance a social investment project
dealing with people seen as high risk group, and even worse
banks are expensive and give conditions that are not easy to
meet,” he told the Thomson Reuters Foundation, referring to high
interest rates charged by banks.
TRINE, a Swedish company which raised funds for EcoZoom, has
a community of about 1 000 young investors in northern Europe
willing to each give a minimum of 25 euros ($27.14) to solar
firms which aim to help the world’s poorest.
Using crowd funding, it has raised more than 750 000 euros
($814 200) for 10 renewable energy projects since its launch
last year, said Matthew McShane, TRINE’s regional manager in
East Africa. The firm has invested in countries including Kenya,
Zambia, Uganda, Tanzania and Senegal.
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In Kenya, EcoZoom received 170 000 euros in February, while
160 000 euros went to Azuri East Africa, part of Azuri
Technologies. Two solar micro-grids have also received funds.
“The majority of [our] investors can invest in many other
ventures in Europe but choose to put their money in social
impact projects partly because they want to touch the lives of
the poor and partly because returns are slightly higher when
compared to ... normal investments,” McShane said.
The returns are about 6 percent, because of the perceived
higher risk associated with this market, he said.
Growing trend
Globally, crowd funding provided $2.1 billion in investment
in 2015, and investments in developing countries alone are
predicted to exceed $96 billion a year within a decade,
according to the World Bank.
It is emerging as an increasingly important means of
financing new technology at scale in rural Africa, said Azuri
Technologies CEO, Simon Bransfield-Garth.
Unlike microfinance institutions where large investors make
many small loans to firms, crowd funding allows many small
lenders to provide substantial finance to organisations with the
reach and scale to deliver significant impact, he said.
“Crowd funding is clearly no longer just for start-ups and
has the potential to provide a new class of capital for energy
access,” Bransfield-Garth said.
Azuri East Africa turned to crowd funding when it wanted to
raise cash to help its Kenyan partner, Raj Ushanga House, sell
solar panels to 1 200 homes, helping 6 000 people access
electricity.
Crowd funding is one of the most progressive and innovative
ways of raising money for projects, and relatively unexploited
in Africa, said George Wachiuri, a leading Kenyan investment
advisor and head of Optiven, a company based in Nairobi.
"It is a trend we should see grow in Africa in the future,
especially when projects impacting the poor are involved,” said
Wachiuri.
Crowd funding needs to be carried out by specialised firms
that are well versed with the concept, he added. “One needs a
good understanding of how this type of fundraising works to be
able to execute it successfully.”
TRINE conducts due diligence on a company seeking
investment, assessing its business model, supply chain, profit
margins and ability to repay, before starting to raise funds.
In East Africa, where it has helped fundraise most, the firm
is attracted by relatively high awareness about solar energy
with “mature markets”, and the availability of mobile money
platforms - such as apps - that mean consumers can easily make
payments using their mobile phones, McShane said.
"So far ... things have gone smoothly. Those we have given
money to are making their repayments on time and so far we
cannot say there is risk in funding these investments,” said
McShane.