responsAbility Summary

The responsAbility Energy Access Fund provides working capital to manufacturers and distributors of modern energy products to accelerate their growth and scale of impact.

Market Need

The single biggest barrier preventing the growth of established social enterprises serving low-income customers is a lack of working capital to manufacture, import and distribute their products.

Demand for modern energy products such as solar lights and clean cookstoves has grown rapidly over the last decade. For example, in Africa the market for solar portable lights alone has grown by 90% annually for the last four years. 

By providing working capital loans of up to $3 million, responsAbility aim to improve the livelihoods of 20 million people over the next three years

While this is a promising trend, it still only translates into a very low level of market penetration (around 3%). We need these markets to grow much faster if we are to make meaningful progress towards universal access to energy.

For enterprises that are already selling thousands of products every month, the single biggest barrier to growth is a lack of working capital to manufacture, import, and distribute their products. These enterprises struggle to obtain finance from banks (due to their lack of sufficient track-record and availability of collateral) and, beyond dipping into limited and expensive equity reserves, have few other options to fund their working capital needs.

 

     
  In 2011 Shell Foundation partnered with the OPEC Fund for International Development to pilot a revolving working capital facility, in order to test the theory that leading manufacturers of low cost energy products could indeed accelerate their growth if they were provided with flexible credit.

This facility enabled d.light and Envirofit to import products into Africa, and to extend credit terms and skills support to carefully selected distributors. 
 
     

 

stove_lantern-(2).jpgThe pilot far exceeded expectations, catalysing the sale of over 800,000 solar lights and 100,000 clean cookstoves in less than 24 months and pointed to a possible sector-wide solution to solve the working capital bottleneck in the off-grid energy value chain.

 

responsAbility Energy Access Fund

In 2013, we formed a strategic partnership with responsAbility – an impact-focused fund manager with a strong track record of financing SMEs in emerging markets – to establish the responsAbility Energy Access Fund, which will be dedicated to providing working capital loans of up to $3 million for fast growing energy enterprises across the globe.

In addition to accelerating the growth and social impact of individual borrowers, the Fund’s wider objective is to help validate the credit worthiness of the leading enterprises in the sector. This will help legitimise the market in the eyes of commercial investors and governments and support the case for energy policy and legislative reform to catalyse the market as a whole.

The Fund launched 2015 with an initial capitalisation of around $30 million, with participation from several anchor social investors including the IFC. An additional technical assistance facility will provide professional advisory services to borrowers (funded by the Swiss State Secretariat for Economic Affairs - SECO).

The Fund aims to accelerate the growth of the energy sector and will raise additional capital in the medium-term in order to ensure that it is a realiable financing source for companies as they continue their growth path.

The Fund will employ a tiered capital structure to catalyse participation from private sector investors. This structure will include a first loss tranche provided by Shell Foundation and a second loss tranche provided by Lundin Foundation, together providing approximately 11% risk coverage to senior investors on a declining basis.

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