Solar finance startup SunFunder, an investor in Arc Finance partner SolarNow based in Uganda, has closed a US$2.5 million Series A funding round, a milestone for investment in off-grid, small-scale solar. Alongside support from Khosla Impact and Better Ventures, SunFunder secured funding from Schneider Electric, a major multinational player in energy products and key investor in Arc partner Simpa Networks, which manufacturers and distributes solar home systems with a proprietary metering system in Uttar Pradhesh, India.Read
Schneider’s involvement is a boon for SunFunder in particular and for small-scale energy finance in general. The role that both have played in working with Arc Finance partners makes this deal something Arc Finance is proud to highlight.
Based in San Francisco and Tanzania, SunFunder provides short-term working capital and project finance loans for solar home systems, microgrids and commercial solar projects in emerging markets. The company raises debt capital through the Solar Empowerment Fund, offering accredited investors a risk-reduced, fixed-income investment opportunity in diverse portfolios of high-impact solar loans across multiple countries and solar technologies. The company is creating a solar finance ecosystem that aims to catalyze billions in financing for solar beyond the grid.
Schneider’s partnership in this venture is a true watershed. An energy giant that has operations in 100 countries and annual sales of US$30 billion in 2013, Schneider has products ranging from circuit breakers to power plants, distributed solar products to AC and DC microgrids. Its involvement is a sign that small-scale solar is moving beyond a niche market and into a mainstream, global one. For Schneider, financing will unlock working capital in order to finance distribution of its wide range of products. Schneider is working on launching its new US$80 million energy access fund with bilateral agencies like the U.K.’s DFID and the EU’s EIB to help unlock capital.
SunFunder, which has provided US$425,000 to Ugandan Arc partner SolarNow (an Arc case study of which can be found at www.arcfinance.org/knowledge) plans to raise and deploy US$100 million in the next three years into solar projects around the world and to expand its capacity in local markets, starting with East Africa. The IEA estimates that the world requires US$44 billion of investment to expand electricity infrastructure to achieve universal energy access by 2030. Of that US$44 billion, it is estimated that US$26 billion will be put towards toward decentralized systems that have been largely powered by renewable energy, according to SunFunder.
SunFunder’s platform for attracting capital to the small-scale, off-grid sector includes the Solar Empowerment Fund (SEF) – a debt facility that issues Solar Notes to accredited and institutional investors, offering a rare opportunity to invest in a diversified, vetted, and high-impact portfolio of off-grid and grid-deficit solar projects with an attractive risk/return profile. In Sept 2013, SunFunder closed its first issuance of Solar Notes, raising US$250,000 from four investors.
In addition, SunFunder is continuing to fundraise from accredited and institutional investors and from its crowdfunding platform, in which non-accredited investors anywhere can invest as little as US$10 in any of the projects listed on www.SunFunder.com (and is profiled in an Arc Finance briefing note on Crowdfunding, available at http://www.arcfinance.org/knowledge).
Once a project is fully funded, SunFunder facilitates low-cost financing to the solar partner to fund its implementation. As projects get repaid, investors earn their investment back (without interest, due to current regulatory limitations), which they can invest again or withdraw. SunFunder’s solar partners pay a modest interest rate on the financing that they receive, which is passed back to SunFunder’s investors as Impact Points, which can be reinvested into other projects. See Arc’s Briefing Note on Crowdfunding for a more detailed explanation of how this works.
Ryan Levinson, CEO of SunFunder, shares Arc’s view that access to reliable finance is the main barrier preventing solar energy providers from reaching scale and leapfrogging the grid in target markets. “In the last two years, SunFunder has established a solid track record and proven that the market is economically viable. This investment round will allow us to expand our capacity in local markets and substantially grow our loan portfolio,” he says. For more on Ryan’s thoughts, see Arc’s YouTube channel for a panel discussion video at Arc’s Innovations in Finance conference.
So far, SunFunder has financed more than US$1.7 million for solar projects, with 15 solar companies in six countries, and maintains a zero percent default rate, helping over 140,000 off-grid people in developing countries access affordable solar energy.
At Arc Finance, we’re proud to see SunFunder and Schneider, funders of two key Arc partner organizations, pass this key milestone. As this important and young sector attracts mainstream financing, it demonstrates to new investors that investing in renewable energy for off-grid customers is a sustainable commercial venture – and here to stay.
Simpa Networks, one of Arc Finance’s partners under the USAID-supported Renewable Energy Microfinance and Microenterprise Program (REMMP), has successfully raised $4M from the Overseas Private Investment Corporation (OPIC), the U.S. Government’s development finance institution, and from GDF Suez, through their Rassembleurs d’Energies program.Read
With support from Arc Finance, which was Simpa’s very first investor, Simpa created a pay-as-you-go solar business model enabled by its proprietary metering technology. Simpa sells solar-as-a-service to energy-poor households and micro-enterprises in rural India. Simpa will use the new finance to expand its reach from a current base of 25,000 beneficiaries to up to 200,000. The scale of the future opportunity is considerable, as an estimated 400 million people in rural India still do not have access to an electricity grid.
As Paul Needham, Simpa’s President and Co-Founder, tells it, distributed solar-powered electricity systems are dramatically improving the quality of life for energy-poor families while promoting economic activity by enabling small businesses to extend their working days. This new debt investment – the first of its kind in India – will help Simpa scale its for-profit solution to the problem of energy poverty, and vindicates Simpa’s and Arc’s belief that clean electricity for rising rural India is an investible, scalable and sustainable proposition.
“Support from Arc Finance has been instrumental at several stages of our development,” said Paul Needham. “Arc Finance initially provided seed capital to help us pilot our solar-as-a-service model, and it was Arc Finance, under the REMMP program, that helped us improve our credit models and processes so we can scale up.”
Simpa operates in rural Uttar Pradesh, an Indian state with a severe power deficit. This unprecedented new debt facility will enable Simpa to reach hundreds of thousands of “energy poor” households with clean, reliable electricity services, in a business with high working-capital demands. Simpa’s tested model – a patented technology platform that integrates a meter into a complete solar home system and includes after-sales support – has already provided over 770,000 energy days equivalent, delivered over 65 MWh, created over 2,800 full and part time jobs in rural India, and saved over 75 tonnes of CO2 equivalent emissions.
Simpa operates in India as Simpa Energy India, and has pioneered the solar-as-a-service business model. Simpa customers make a small initial payment for a solar electric system installed in their home or business. Customers then purchase “energy days” using a prepaid or pay-as-you-go mobile payment system. Upon completion of the contract, customers own their systems, affording them free, clean electricity for the rest of the system’s life.
Elizabeth Littlefield, OPIC’s President and CEO is a big supporter of what Simpa is trying to do. She has said that “The kind of technological leap Simpa and like-minded innovators are achieving proves that off-grid, clean energy in emerging markets is not merely viable, but a true opportunity both financially and environmentally.”
For GDF Suez, in Simpa there is an opportunity to help a growth-stage company scale up its impact to reach tens of thousands more people with affordable, clean, renewable electricity. Says Jérôme Broutin, CFO of the company’s Rassembleurs d’Energies program: “We invest in for-profit solutions that can scale to meet this challenge.”
We at Arc Finance are enormously proud of the growth and innovation at Simpa, which alongside several other partner organizations across India, Uganda and Haiti, is testing and demonstrating the viability of a variety of sustainable business models for solving affordability and distribution challenges in small-scale clean energy. We are thrilled that Simpa has been able to close this debt round, and look forward to working with Simpa as it passes many more milestones in the future.
Mahashakti Foundation (MSF) is one of Arc Finance’s partner organizations under the Renewable Energy Microfinance and Microenterprise Program (REMMP) funded by USAID. An NGO-MFI based in the Indian state of Odisha, MSF has, with Arc’s support, provided loans for efficient cookstoves and solar portable lighting under REMMP. In recent months, MSF has taken on a more ambitious program: connecting rural, off-grid villages to solar microgrids. Durmusi and Totaguda are two examples of how a partnership between the financial institution, investors, developers and the villages can connect households to reliable, clean and affordable lighting – providing significant and positive economic, social and environmental impact to these communities.Read
Durmusi village is situated in the Gopinathpur Gram Panchayat of Thuamul Rampur block of the Kalahandi district in Odisha. A largely tribal block, Thuamul Rampur is the poorest block in the district and lacks even the basic infrastructure of roads, water, communication and electricity. Illiteracy rates are high – 95% for men and 97% for women. Socio-economic and gender disparity rates are also among the highest in the country. Durmusi consists of 47 households, with 230 people. Most are small-scale farmers, people scavenging in the forest for produce to sell, and some daily wage workers. MSF is one of the few financial institutions or NGOs working in what is one of the least developed parts of India.
After promising results with sales on credit of efficient cookstoves and small-scale portable solar lighting, MSF with Arc’s support conducted a needs assessment of the area, concluding there was scope for installation of a solar microgrid. TERI New Delhi and Utkal Alumina Kashipnded supported the installation, and the microgrid is now operating in the center of Durmusi, with solar modular units allowing generation capacity to scale up easily to meet demand.
Demand has been considerable. Out of 47 households, 40 are connected through fixed wiring with two LED lights per house. Operation and maintenance costs are only INR 30 (USD $0.50) per month per household. Power is generated during the day, charging four battery banks, and consumed during the night. The whole system is controlled by a main switch, installed in one household – that of a designated Village Level Entrepreneur (VLE). The two LED lights were selected to provide superior lighting quality to kerosene – the previously dominant lighting source. A Users’ Committee has been formed, involving all active households, and a President and Secretary appointed to ensure smooth management of the grid.
When the grid was installed, the villagers requested that one grid node be used for a street light in the center of the village, which is the social focal point of Durmusi. This allowed villagers to meet in the evenings, and will enable them to celebrate local festivals all year round. As Sri Bagi Majhi, one of the village leaders, says: “The light brings our village together now.”
Totaguda is close to the block headquarter Kolanara, in Odisha’s Rayagada district, and includes 33 households with around 150 people. The Government of Odisha has launched a program called Biju Grama Jyoti, with the objective of supplying grid electricity to each household. However, Totaguda’s remoteness means there is no grid connection at all. Like the villagers in Durmusi, most residents depend upon income from agro-forestry, or have small plots of land, and rely on rainwater for irrigation. Infrastructure is virtually non-existent. There is no school, health center, nursing or veterinary facilities in the village. Totaguda villagers are entirely dependent on the villages of Khamasing and Kolnora for any medical, educational or other support. The only infrastructure or services of any kind is, again, MSF.
Totaguda was therefore a clear choice for a microgrid pilot project, because of the immense impact that regular, clean and inexpensive electricity would have on its residents. It was during a village borrowers’ meeting that one of MSF’s solar sales officers identified the issue of grid inaccessibility in the region, and raised the issue of switching Totaguda to a microgrid. Interest and enthusiasm only continued to increase after educational sessions informed the residents of the benefits and responsibilities involved.
After a needs assessment study by MSF, TERI New Delhi supported MSF with a CSR fund of from SBI in Mumbai. Out of 33 households, 32 are now connected to the microgrid, which is similar in design and capacity to the slightly larger one in Durmusi. As in Durmusi, there is a Villagers’ Committee, with a President and Secretary. A joint savings bank account has been opened in Mahashakti Primary cooperative in Rayagada in the name of the President and Secretary. The usage fees, (again, INR 30/month per household) are tied to previous monthly expenditure on kerosene.
Besides the intangible community benefits of having lighting at night, several villagers have expressed plans to use the after-dark lighting for income-generating activities, extending their potential working hours, as well as encouraging children who are in school to do homework after dark.
Roji Madangi, 29, is a typical Totagudan. As darkness falls, she scampers to wind up her daily evening chores. Like most other women in her village, she heads to her kitchen to prepare dinner long before dinnertime, because preparation and cleaning under the light of kerosene is almost impossible. Roji’s husband is a farmer and the sole breadwinner for the family, earning about INR 3,500 (US$56) per month, which isn’t enough to provide even two meals per day for everyone in the family. This is a typical story, but one which has dramatically changed since the installation of the microgrid. The microgrid lights the village for more than seven hours per night, meaning villagers can prepare food and eat after dark, spend less on kerosene, and work longer productive hours. At night, the women are now able to earn income for the household by stitching sal leaves together to form Kholi, a plate made out of leaves. Roji herself now earns more than INR 2,000 (US$33) per month – adding half again to her husband’s monthly household earnings.
“Before, we could not even imagine this freedom in our families,” she tells the Arc team. “Our rice production was barely enough to support us, yet now I feel more empowered because I contribute to the household by not only making food for us, but by earning too.” Roji adds, “I make 100 to 150 Kholi each day, which we sell at one rupee each, and we get enough money from our hard work to afford both plenty of food and to save.”
A village ward member, Sri Naria Mandangi, says that she has been encouraging her neighbors to start new income-generating activities and make use of the additional productive hours at night. With access to modern electricity, each household in this small settlement will have an inspirational story to share. At Arc Finance, we’re proud to see the results that our partner organization MSF is achieving, and look forward to sharing more of these stories in the months and years to come.
The Buksh Foundation is a young, up-and-coming microfinance institution based in Lahore, Pakistan. In 2010, the organization piloted a clean energy loan program to help business clients better cope with Pakistan’s escalating electricity crisis. In this episode, CEO Fiza Farhan discusses the MFI’s vision of expanding energy access, and the diverse activities – including product design – that it engages in to realize it.
€2 million equity investment lays groundwork for scaling renewable energy asset finance and distribution in East Africa
SolarNow, the Uganda-based solar asset finance company, has closed its most recent equity round, raising €2 million from Novastar Ventures and Acumen, to help meet massive demand for high-quality solar technology in East Africa.
Providing a range of modular 50-500 Watt solar home systems and DC appliances through a franchise model to mainly rural customers in Uganda, this investment will enable SolarNow to expand its branch network, further upgrade its Management Information System (MIS), and invest in R&D.
Willem Nolens, CEO of SolarNow, says that with this investment, SolarNow will focus on fulfilling the growing demands of its existing clients, expand to under-served areas of the country, and prepare for expansion into other East African markets in the medium term.
“Our business has high working capital demands. The more we sell the more money we need. We are buying the best components and selling them to low-income customers, with just a 20 percent deposit payment. However, this does mean a company like ours needs a steady and ready supply of capital, both to finance the systems before installments are complete, but of course also to plan for future expansion. Equity can stimulate further debt capital, and so this equity investment by two partners who share our vision, is so welcome. It will allow us to do what we are doing, better, and to do it with many more people.”
“We see Novastar Ventures and Acumen’s support as a great acknowledgment of our business model, and a shared assessment of the future plans we have. We’re not just a solar product company or a pay-as-you-go service provider; we are an asset finance and distribution company with a focus on renewable energy. Bringing together affordability and distribution with great products is what justifies this trust,” Nolens concludes.
Mauritius-based Novastar Ventures and US-based Acumen have invested €2,000,000, based on what they believe to be a great opportunity for scale into the region and product diversification.
Andrew Carruthers of Novastar Ventures said: “We are impressed by SolarNow’s well-developed distribution network as well as the quality of equipment and service they provide. They raise the bar for low-income customers in terms of affordability, reliability and service guarantees. We look forward to working with them to scale rapidly into this poorly served market.”
Duncan Onyango, East Africa Director at Acumen said: “We are excited about our investment in SolarNow, a company whose solar products clearly improve the lives of rural households in Uganda.”
A recent update has been published to a 2012 Case Study written by Arc Finance, which is supporting SolarNow under the USAID-funded Renewable Energy Microfinance and Microenterprise Program (REMMP). This case study update, which provides more information on SolarNow’s business model and strategy, can be found at Arc Knowledge.
Arc’s REMMP India Partners meet for a full day of strategy building and knowledge sharing in Delhi
Financing Small Scale Off-Grid Clean Energy: Opportunities and Challenges for Arc’s Partners, a workshop in Delhi, India organized by Arc Finance in conjunction with USAID, brought together microfinance institutions (MFIs), energy enterprises, a crowdfunding platform, and an MFI apex funder for a day-long strategy session.
How can MFIs best work with energy companies to bring renewable energy (and finance for it) to remote communities? How can these organizations make sense of the growing market of renewable energy products available? How can the sector access the long-term, low-cost debt required to reach scale in a working capital-intensive industry? And how can Arc Finance continue to help its partner organizations and other institutional friends to move from idea to business model to pilot to scale? These were among the questions discussed in a workshop round-table format with twenty CEOs and managers from Arc’s REMMP partner organizations in India (representing almost a dozen organizations across several states in India) and the Arc Finance team.
Funding challenges and opportunities were arguably the key issue of the day, with Arc partners FWWB and Milaap.org leading the discussion about the challenges of accessing low-cost and longer-term debt finance. Over the past several months, Arc Finance has been undertaking stakeholder research on debt finance needs by MFIs specifically for energy lending. The findings show strong demand and interest for an energy specific debt facility for MFIs, and this was reinforced by Arc’s partners at the Delhi Meeting. All present agreed that the market is ready for innovative new financing initiatives to scale the sector.
Results-driven business model experimentation was also a particular theme of the day. The partners discussed their experiences and lessons-learned from experimenting with different business models. The willingness to experiment and adapt when things aren’t working is a characteristic of successful organizations in any sector; energy finance is no different, as Utkarsh, WSDS, Mahashakti Foundation and Grameen Koota demonstrated when sharing their experiences.
The partners then took a deeper look at different sales models, which are central to any organization’s energy finance business model. Should an organization retain mobile agents such as Village Level Entrepreneurs (VLEs) to carry and demonstrate products to potential customers? If so, should the VLE’s offer informal credit to customers who cannot afford to buy in cash? How does the institution get the products into the hands of agents – through micro-consignment, for example? With whom lies the responsibility for timely after sales service in the case of a defective product?
Several of Arc’s partners in India and other countries are exploring these options, identifying and adapting the right model for energy lending. DCBS (a small MFI in West Bengal) and Simpa Networks (a developer of proprietary metering technology for solar home systems which now uses a direct sales model) have both shown innovations in sales models – particular through agents. And while anecdotes are not evidence, sometimes one deserves a moment’s spotlight: the son of a DCBS client who received a loan for a solar lantern recently placed 44th out of more than a million candidates nationwide in tertiary entrance exams, something he attributes in large part to being able to study in the evenings thanks to his solar lamp.
How to transition from “push” products (supply-led) to “pull” products (demand-driven) was a dominant theme as well. The primary market barrier for energy products is lack of trust – particularly when government initiatives in the past have introduced poor quality products, hindering their reputation and making energy programs all the more difficult down the track. But as so many stakeholders know, energy clients very often become repeat energy clients – who increasingly “pull” new products as their trust and energy needs and appetites grow.
The final session of the day was interactive and more open. The participants were asked to articulate their visions and dreams for the small-scale renewable energy finance sector in the years to come. Beyond sales targets, what do they want the future to look like? Arc’s wide range of partner organizations had various aspirations, from product expansion to unlocking new sources of financing. But one common thread was the recognition that this sector is not just about providing lighting to off-grid communities. Rather, it’s about understanding and supporting the so-called “energy ladder,” or “escalator.” Partners are committed to providing broad solutions to help clients climb this ladder while increasing household economic productivity along the way.
The willingness of Arc’s partners to share information so freely is clear evidence that they see themselves all heading in the same direction and that ending “energy poverty” is a shared goal. This partners’ meeting built upon an Arc-workshop held in Manila last October in conjunction with the Microcredit Summit, and there is strong enthusiasm for this group to morph into a de facto network. Arc Finance provides a range of services to stakeholders, from Technical Assistance (which includes product identification, marketing, human resources, business model and sales support) to loan guarantees, catalytic grant funding and training. But core to its mission is being a “conduit” of sorts, a hub to develop new partnerships in small-scale energy finance. To this end, this partners’ meeting in Delhi was an exciting platform that Arc Finance was proud to organize, and from which the Indian sector can continue to grow.
Yara Akkari tells an expert audience how Indian crowdfunder and Arc partner Milaap.org is bringing new financial channels to small-scale renewable energy sector
Arc Finance’s Remittance Specialist and East Africa Manager Yara Akkari was in Paris on June 17th to speak on a crowdfunding panel at the CrowdTuesday event – a regular platform that brings together various stakeholders in the crowdfunding industry at the local and regional level. CrowdTuesday is run by the European Crowdfunding Network (ECN), and organized by Alex Raguet, ECN’s French Ambassador.Read
Presenting in a panel discussion entitled Crowdfunding as Financing Mechanisms for Clean Energy, Yara demonstrated to her high-level audience how tapping the “crowd” provides much-needed capital opportunities for MFIs that aim for social benefits – namely, clean water, clean energy, education and sanitation.
“Crowdfunding enables MFIs to tap into new sources of funding: it fills the gap for essential-service lending by using financial resources sourced from large numbers of lenders – a form of ‘unconventional lending,’” she said, and then put its role in the context of financial services to the poor as they stand. Microfinance Institutions (MFIs) – several of which Arc partners with – “can play an important role in the removing the barriers to affordability in adopting new sustainable energy products.”
However, she argued, “The Indian microfinance sector has been slow to embrace energy lending as a mainstream practice. While a number of factors contribute to this situation, lack of access to affordable capital from conventional sources of debt and investment is a significant one. Milaap’s crowdfunding platform was developed to close this gap.”
Milaap.org is one of Arc’s partners under the USAID-supported Renewable Energy Microfinance and Microenterprise Program (REMMP), the goal of which is to “increase access of underserved populations to clean energy products in order to improve livelihoods and quality of life among these target recipients while minimizing climate-damaging emissions.”
With the support of USAID, Arc Finance launched REMMP in 2012 to test a range of business models that are designed to increase financial access to clean energy for poor people around the world. REMMP partner organizations include FWWB-I (an “apex” microfinance organization); Bandhan (by some measures the world’s largest MFI); Basix-IGS (within which Arc is “greenfielding” an energy-lending enterprise); Simpa Networks, which is pioneering metering technology for solar home systems; SolarNow, which provides an innovative in-house credit facility for solar systems to rural farmers in Uganda; Sogexpress, a money transfer organization in Haiti that, with Arc’s support, is using remittance channels to enable the diaspora to remit clean energy technology; and Milaap – a crowdfunding platform with a focus on using MFIs as a means to help people get clean energy products for their homes and businesses.
Crowdfunders that partner with MFIs to lend to microentrepreneurs are not new. Kiva.org was the first to reach scale doing this, and has lent over US$500 million dollars since 2005. Milaap is newer and much smaller, but is differentiated in its specific focus on water, energy, and education. Put another way, and as Milaap’s founders have put it at various Arc Finance events, microfinance is “a means to an end, not an end in itself.” Lenders coming to the platform are not lending to small businesses; they’re lending to help people access clean water, energy or education, and the livelihood and income development that comes with each.
Milaap (“connecting people” in Hindi and Urdu) was initiated in June 2010 by three young MBA graduate entrepreneurs who wanted to change people’s concept of giving by making it a personal, transparent and sustainable process. The end-borrowers on this platform are the deserving, working poor of India – students, small businesses, families – for whom a small amount of capital will significantly change their lives for the better.
One hundred percent of a lender’s funds go to the end-borrower for energy, water, sanitation or education purposes. Milaap charges its field partners a 5 percent fee on the funds raised, which currently covers a fraction of Milaap’s costs while it works towards achieving financial self-sufficiency. The shortfall until it reaches scale and when the fee is enough to break even is covered by investment from individual and institutional investors and donors.
It’s been a rapid learning curve, said Yara. By mid-2014, Milaap has raised and channeled nearly over US$1.5 million into a diverse portfolio of nearly 10,000 loans, impacting the lives of 50,000 people, while maintaining a 100 percent repayment rate from field partners. Funds are raised from an increasingly global crowd of lenders and disbursed to borrowers across ten Indian states through a network of 15 different current field partners. The company’s energy portfolio continues to advance through its active partnerships with three Arc-partnered MFIs based, respectively, in the states of Orissa, West Bengal and Manipur. Due to the comparatively small size of loans for clean energy products such as solar portable lanterns and improved cook stoves, energy represents only ten percent of Milaap’s total portfolio – but is increasing.
After taking the audience through the Milaap.org website, the loan-disbursal and repayment cycle (see figure), selected client profiles, and the filters that lenders can apply to direct their loans to specific regions, sectors or purposes, Yara gave a short profile of DCBS – a small MFI in Eastern India which is a sub-partner of Arc Finance under REMMP, and a beneficiary of Milaap’s crowdfunders.
DCBS is a small, community-based MFI that operates in 200 village communities in West Bengal. It has an active client base of 8,000 women borrowers. In December 2012, DCBS began promoting a new solar lantern loan product to existing clients (through a line of credit provided by Milaap, funded by the crowd), which is now expanding to non-clients.
As of mid-2014, DCBS’ solar lending program has a 100 percent repayment rate, has seen rapid portfolio growth and high penetration in the target communities, a consistent validation of this type of energy-lending as sustainable and commercially attractive, and early but positive social impact results. Other MFIs supported by Milaap and Arc Finance are also providing finance for a range of products, from clean cookstoves to multi-light and multi-appliance solar home systems.
Not everything has worked perfectly, of course. As Yara told the audience, there is always an element of trial and error in piloting new and innovative channels in order to demonstrate the commercial viability of a model for scale. Learning lessons along the way is important, and inevitable. Not all MFI partners have had the same success. Due diligence conducted by the crowdfunding platform to determine the capability (and, crucially, the dedication) of the MFI to introduce energy lending, is paramount. Finding the right field MFI partner is a necessary criterion for success.
What’s more, just providing MFI clients with access to credit for energy products isn’t enough either. Providing marketing support, client education, after-sales service, quality and appropriate products that are demand-driven, efficient “last mile” distribution, and appropriate pricing and financing options are all crucial. It is the role of the crowdfunder to assess – and where appropriate, assist – with these variables for success. It is this type of specialized technical assistance that Arc Finance has been providing to DCBS and other Milaap partners under REMMP.
Finally, Arc’s experience has been that training and awareness-raising are crucial elements which should be included as part of the clean energy program. Whether funding comes from donors, funds or in small increments from a crowdfunding platform like Milaap, and whatever the business and distribution model the MFI uses, a highly-engaged and informed staff, capable of talking to clients about their energy usage, costs and needs, is indispensable.
Yara finished with Q&A from the audience (which was particularly interested in product selection and warrantee challenges in remote communities). Arc looks forward to being invited back to further ECN events as it works with crowdfunding platforms to fill the working capital “gap” in pioneering small-scale, clean-energy finance.
The Ashden Conference and Awards gives organizations in the renewable energy space a chance to showcase and share innovations in sustainability with practitioners, investors, academics and the press. As in previous summers, Arc Finance participated in this year’s conference, alongside current and potential partners working on ways to bring affordable, clean energy to the BoP. The 2014 Ashden International Award finalists were winners in five categories: Financial Innovation; Avoided Deforestation; Clean Energy for Women and Girls; Energy for Agriculture; and Sustainable Buildings. Each of the winning organizations is working on a solution to the problems that are part of Arc Finance’s core mission, which includes helping scale the clean energy finance sector by shining a light on enterprises that are leading the way through innovation.Read
Infosys wins the Sustainable Buildings Award
One of India’s largest IT companies, with campuses at ten locations across the country and offices around the world, Infosys has been designing new, low-energy buildings and retrofitting existing buildings with the technology applied in new construction – decreasing electricity consumption per staff member by 44% across its Indian business campuses in the last five years.
Infosys has realized annual savings of US$200 per employee, and 39 percent of the company’s electricity is now generated or purchased from renewable sources. GHG emissions have been cut by 57 percent (or 210,000 tons per year), three quarters of which is from efficiency measures alone.
For true sustainability, improved efficiency has to make a “single bottom line” case – it can’t be just for environmental and social reasons. To this end, Infosys invested with the goal that the cost of retrofits would be paid back in energy savings within three years.
The company seizes every opportunity to reduce energy consumption, from reducing the size of chiller plants for air conditioning, to painting roofs white to reflect the heat. Cutting-edge design for new buildings also helps keep offices cooler and maximizes natural light. With US$80 million cut from its energy bills and targets of halving electricity use per employee and all electricity coming from renewables by 2018, Infosys has made the bottom-line case for large companies to invest in energy efficiency.
The Financial Innovation Award goes to Off.Grid:Electric
Off.Grid:Electric is a Tanzanian company that has emerged as a leader in the field of using mobile money to sell affordable pay-as-you-go solar power – of particular interest to Arc Finance, which works with different partners with various approaches to the affordability challenges of solar.
East Africa – countries like Kenya, Tanzania and Uganda (where Arc’s partner SolarNow is based, and is using a hire-purchase credit facility to provide a different affordability mechanism) – is an exciting “petri dish” of experiments in clean energy innovation. Mobile Money, through M-PESA, first reached scale in Kenya, and the model is now being replicated across several sub-Saharan countries. Leveraging mobile money infrastructure to allow poor customers to pay for clean energy in regular, small amounts is an opportunity that Off.Grid:Electric (among others) is capitalizing upon.
Off.Grid:Electric considers itself a service, more than a solar, company. The founders wanted to make solar electricity a mass-market option by focusing on exceptional customer service, including an all-day customer-care telephone line and ongoing support from a local agent. With more than 15,000 homes taking up Off.Grid’s service so far, benefitting 70,000 people, customers are being connected as fast as systems can be manufactured and distributed, thanks in part to a cloud-based customer registration process and product-tracking system app.
Off.Grid:Electric provides an agreed-upon level of electricity service through a five or ten Wp Solar Home System (SHS), including mobile phone charging, which is rented by the customer and installed after payment of a deposit of US$6 or $9. The entry-level model costs roughly US$0.20 per day (the top-end system costs about 63 cents per day) paid over a mobile money platform – with a minimum of one day’s purchase per transaction.
A network of local agents is used to find customers, install systems, and provide ongoing after-sales support. Custom smartphone apps keep customer data, usage, system and payment information integrated and accessible to agents. For the very few customers without a mobile phone, agents can take cash payments.
Crucially, the company prioritizes flexibility of payment for the customer, recognizing the cash-flow limitations typical of poor customers. Service level can be changed, and payment history builds a credit rating for the customer that can be used for other purchases. Off.Grid:Electric currently has about 90 staff – half of which are female – and a network of several hundred local agents. It is financed mainly through equity investment, supplemented by debt and grant funding.
Sustainable Green Fuel Enterprise wins Ashden’s Avoided Deforestation Award
Deforestation and its dire environmental consequences – air pollution, soil erosion and desertification – remain a critical problem in certain countries. Sustainable Green Fuel Enterprise, a Cambodian business turning leftover coconut shells and other bio waste into clean-burning char-briquettes for use as cooking fuel, was the winner of Ashden’s Avoided Deforestation Award.
Most Cambodians cook on wood charcoal, resulting in the world’s worst case of deforestation: the country lost 2.9 million hectares (14 percent of its total land area) in two decades (1990-2010). In addition, the negative health effects of burning wood charcoal, particularly indoors, are well known, and include eye and respiratory disease.
To reduce wood charcoal use, French NGO GERES had already introduced efficient charcoal stoves to the markets, and wanted to expand to tackle charcoal supply as well. In 2009, it partnered with a children’s charity to launch Sustainable Green Fuel Enterprise (SGFE).
Led by Carlo Figa Talamanca, SGFE can scarcely keep up with demand. SGFE produces the char from waste coconut shells (widely discarded and accessible) using low-emission TLUD kilns, and it also buys wood-char from electricity generators. The char is mixed with water and a binder and extruded into briquettes, which are then dried using the waste heat from the kilns.
To date, over 650 tons of char-briquettes have been produced, and production is accelerating. The 47 tons produced in March 2014 alone equals the cooking needs of 1,250 households. Each ton saves ten mature trees, so the equivalent of over 6,500 mature trees have been saved to date. GHG emissions have been cut on the order of 4,500 tons equivalent in 2013, all while introducing a superior product to the market at a cost – 34c/kg – similar to wood charcoal, and cheaper to use due to its reduced waste and uniformity of heating.
A more expensive product – the “diamond briquette,” made from 100 percent coconut shell char – costs double the regular briquette, but its slow and sustained burn has made it particularly popular with food vendors.
Production will double in 2014 thanks to a recent grant from the Global Alliance for Clean Cookstoves (GACC), and further private investment will allow yet another doubling of production, according to SGFE’s team.
Greenway Grameen: winner of the Clean Energy for Women and Girls Award
The Clean Energy for Women and Girls Award was won by Indian cookstoves business Greenway Grameen, co-founded by two Indian women two years after completing their MBAs. Greenway’s mission is to provide an affordable, desirable cookstove to improve quality of life for Indian women – who along with their daughters in a male-dominated nation typically bear the lion’s share of household duties, with crippling repercussions on the health and education of the next generation of girls. Despite this, most rural households in India have mobile phones and televisions – so aspiration for consumer goods is alive and well; it’s just a man’s preserve. “The biggest women’s issue in India is men,” argued CEO Neha Juneja, to wide applause.
Collecting and cooking with wood and dung, as hundreds of millions of women are still forced to do, is time-consuming and horrifyingly harmful – indoor air pollution kills more people than diarrhea, malaria and HIV combined – and the majority of victims are women.
To address this, Greenway Grameen’s simple and stylish stoves dramatically reduce kitchen smoke, cook more quickly, and stay cleaner longer. Perhaps most significantly, their design was demand-led from the start; extensive market testing led to an iterative design process focused on women’s needs and aspirations. Marketed as the essential part of a modern kitchen, more than 120,000 stoves have been sold so far, benefitting over 600,000 people in Karnataka, Kerala and Maharashtra states. Two-thirds of the stoves, which retail for US$23, are financed through partnerships with MFIs.
Besides the obvious health benefits of reducing indoor air pollution and the reduction of GHG emissions (over 200,000 tons/year CO2e), considerable time is saved (on average, more than 30 minutes per meal), improving the lives of women and allowing daughters more time to study. But the economic argument is the “clincher”: a stove can pay itself back in 14 weeks through reduced expenditure on wood.
Greenway plans to continue its rapid expansion into other Indian states and then beyond into other markets, as well as introducing a broader range of products.
Proximity Designs wins the Energy for Agriculture Award
Finally, the Energy for Agriculture Award went to a fascinating and inspiring company in Myanmar, Proximity Designs, which is introducing treadle pumps, solar irrigation systems and other sustainable agriculture technologies to this recently-opened nation for the first time.
For rural farmers, lifting water from wells and carrying it across fields is backbreaking and time-consuming work. Until the 1990s, farmers in Myanmar had no access to energy for irrigation in the 20,000 villages that need 3,000 liters per day per small plot. To address this, Debbie Aung Din and husband Jim Taylor traveled to the country in 2004 to head the national program for international NGO iDE. In 2008, their program to introduce access to energy for irrigation morphed into Proximity Designs. Proximity Designs has introduced foot-operated treadle pumps that draw up water from wells and combined them with water-saving drip irrigation technology. Together, these can dramatically increase agricultural yields and incomes.
The results have been transformative. As of this year, 90,000 treadle pumps are in use in 5,000 villages, benefitting almost half a million people. The pumps were designed and manufactured locally, supporting the burgeoning economy, and two further models were introduced, capable of lifting water to raised storage units. The drip irrigation kits were also locally developed and manufactured, and their introduction allows the cultivation of higher-value crops such as eggplant, which require more water. These products are marketed and sold by a growing network of agents, as well as agro-dealers. Pumps range from $25-38, drip irrigation kits are $38, and tanks $25. Some customers pay cash, but many have availed themselves of the low-cash credit facility Proximity has offered in the absence of a mature microfinance market.
The return on these investments by farmers is considerable – with farm incomes increasing by an average of $250 per year. And Proximity Designs – which the Ashden panel described as “the first to bring energy to agriculture in Myanmar…adapting fast to the needs of the rapidly changing country,” is already working on a solar-powered pump, to be introduced in the near future.
Each of the Ashden International Award finalists addresses key challenges to bringing affordable clean energy to the mass market in poor countries. From leveraging technology such as mobile money, to helping farmers increase their yield, to working towards making tragic indoor air pollution deaths a thing of the past, or demonstrating that a global company with a vision can dramatically cut its energy costs and greenhouse gas emissions with some effort and investment, these companies are true pioneers. Arc Finance is proud to know them, and looks forward to continued partnerships with trailblazers in the sector.
Ugandan solar enterprise SolarNow uses a franchise distribution model for Solar Home Systems combined with an in-house credit facility to reach rural customers.
SolarNow is an energy enterprise in Uganda, and an Arc Finance partner under the USAID-funded Renewable Energy Microfinance & Microenterprise Program (REMMP). Established as a social enterprise in May 2011, SolarNow grew out of the Rural Energy Foundation, a Dutch NGO providing distribution and training support for the use of Solar Home Systems (SHS) with market experience across Africa. SolarNow uses asset finance to provide electricity to off-grid rural communities through modular, expandable SHSs, and distributes an increasing range of energy-efficient appliances through a network of franchises around the country.Read
If Product is King, Distribution is God
The challenges of distributing to so-called “last mile” customers in remote communities, particularly in Africa and Asia, are well understood, and various business models seek to address them. SolarNow’s distribution model includes independent franchises that facilitate sales and system installation. SolarNow oversees and supports these franchises through dedicated head office teams to ensure consistent quality across the network. Head office teams supervise sales, marketing, service and credit, provide ongoing support and training, and review and approve credit assessments.
The Merits and Drawbacks of a Franchise Model
A franchise model has distinct pros and cons. Advantages include speedy replication due to standardization; adaptability to local circumstances; quality assurance; reduced risk of branch dilution; likely alignment of incentives between franchisor and franchisee; and cost-effective setup and economies of scale. Disadvantages include a significant up-front investment; challenges in finding suitable entrepreneurs in low-income markets; difficulties encountered in monitoring franchisee activities in remote areas and low-income markets; and – for social-driven organizations – a potential risk of mission drift.
SolarNow’s model addresses these challenges and opportunities by training franchises to consistently install to standard, building strong customer relationships with high quality service support, and driving referral-led sales opportunities. Franchisees are selected for their local contacts and technical skills, as referrals from satisfied, local customers are a key sales driver in a market damaged by a history of poor quality and fraud. In addition, franchisees conduct initial credit assessments, which, if approved, are referred to the head office in Kampala.
Currently, SolarNow has 43 branded branches and authorized franchisees across Uganda with 64 forecast for the end of 2014, and will open its first branch in Tanzania in January 2015. Branches are distributed across the country and target higher-density rural communities.
Selecting the Right Person
As in any agent model, the skills and qualities of the franchisees are indispensable to the business. SolarNow’s sales and marketing team therefore recruits franchisees carefully, and targets the communities in which SolarNow’s current and potential branches are located. SolarNow thereby ensures candidates with knowledge of local networks, language and culture – all of which are important in building strong customer relationships. A premium is placed on particular criteria such as a franchisee’s communication skills, ability to invest time in building a long-term business, interest in working with rural communities, experience in developing customer relationships, commitment to client satisfaction and proven ability to run a business and lead a team.
Training and Professional Development
The creation of a franchise entails an assessment process that includes franchisee interviews with various team heads within the head office, followed by six weeks of training, both in the office and the field. This includes education on sales and marketing, service and logistics, credit processes and IT systems, followed by onsite training with existing franchisees to walk through everything they need to do in the field. Recruits are initially deployed as part of the central marketing team before being assigned a franchisee role.
The recruits who demonstrate the best potential for success are typically entrepreneurs with at least five years work experience. Most candidates have a Bachelor’s Degree and either a technical, microfinance or sales background, for example having worked for or with a bank, MFI, or another solar business, or as an account manager for a retail business.
Ongoing professional development allows new recruits to learn from others and keep up-to-date on products, marketing strategies, targets, customer service and special offers. Most franchisees attend at least four supplementary training sessions a year. Training needs are monitored by the sales and marketing, credit and finance or IT teams, and are led by head office team members. Ongoing coaching is also provided in the form of regular branch visits by the head office teams. Quarterly franchisee group meetings, which include all franchisees from across the country together with head office staff, include workshops and presentations from “star” franchisees sharing best practices.
Incentives for Franchisees
Any organization that uses agents or franchisees (as opposed to salaried employees) for sales has to think carefully about incentives and commission structures. If incentives are too low, there is insufficient motivation for sales and customer service; too high, and overly-aggressive sales/credit practices can be a risk – particularly in MFIs where loan officers can only make a decent living from commission on loans – and there is no dedicated credit team to make the final evaluation.
SolarNow’s asset finance-based affordability model puts an independent credit assessment team at the center of the organization, but takes advantage of the franchisee’s on-the-ground position and relationship with a potential client to provide initial income and asset information – along with the more subjective evaluation of whether the customer is going to be a “credit-worthy” one. Combining this centralized credit process with a commission structure for franchisees encourages franchisees’ natural entrepreneurship (for which they’re selected in the first place) and fosters healthy sales competition while mitigating bad credit decisions.
In SolarNow’s case, franchisees are compensated a commission of about ten percent on each sale. Reward schemes are periodically reviewed, as management feels it is important to adapt to changing circumstances and get regular feedback from franchisees. Current reward schemes include use of a branded truck, new marketing and premises assets, and increasing allowances for each sales target threshold achieved. Franchisees also maintain a security account with the company, accrued as a percentage of their earned commission, which provides collateral for fixed assets provided to them and any losses due to service or credit issues.
Naturally, incentives are based on carefully designed and achievable performance targets, including not just sales but portfolio management (proportion of on-time payments or delinquencies) and quality of installations and customer support.
Profile: A Star Franchisee
During the last quarter, SolarNow’s top performing franchisee was David Kiramiriki, from Kamuli branch. With 76 sales in three months, he won the first branded truck, and the management has recognized his “honest and reliable approach” and “strong commitment to customer satisfaction; a constant focus on understanding his customer’s needs and putting himself in their shoes to develop trust and strong relationships, maintaining consistently high quality in installation and service.” His success is such that he spends proportionately less time on general marketing, as his current clients have transpired to be his strongest promoters – doing some of his job for him, and illustrating the advantage that good customer relationships can have on a franchise’s and an organization’s bottom line.
A Day in the Life
Running a SolarNow franchise is a demanding job, which requires personnel with drive, imagination and stamina. The franchisees drive both the sales process and after-sales services to their customers – building strong customer relationships and positive brand awareness in their local communities. Each franchise has a catchment zone of potentially 40,000 off-grid households within a 50km radius. They also have responsibility for chasing delinquent payments, assisting with repossessions when relevant, as well as uploading (and monitoring) data to SolarNow’s Arc Finance-funded OpenERP Management Information System. A typical franchisee is up early and out in the field with their new and potential customers, performing site inspections and working with clients on their applications. Afternoons are spent working on installations, completing paperwork and uploading data to the system for head office review. Franchisees also typically spend around a quarter of their work time liaising with clients and the head office to deal with delinquent payments and credit issues.
A Franchisee’s Role in the Credit Process
Franchisees are the face of the business to the customer and are key to SolarNow’s success. They explain the contract and repayment process, gather information for initial credit assessments and follow up in cases of delinquency. They’re responsible for monitoring customer repayment performance and ensuring customers understand their obligations. But in cases of serious delinquencies or potential repossession, franchisees are supported on site by the head office credit team. Where necessary and appropriate, the security fund reserve for each franchisee provides coverage for 50% of credit losses.
When Franchisees Fail…
SolarNow’s franchisees have minimum performance targets to meet. Not all do so. Those who fail to follow procedures or fail to meet targets are let go. Some take the skills and experience they have acquired at SolarNow elsewhere – an ineradicable risk in any industry. Franchisee turnover (“churn”) is typically around 25 percent per year and mainly due to failure to meet performance targets.
Learning Lessons for the Future
Nobody achieves perfection the first time, and this is particularly true in remote rural areas of Africa, trying to introduce new products to a new and undeveloped market, while providing asset finance at the same time. It’s a complex and challenging task. For SolarNow, building the network of franchises has been a learning experience. It has meant discovering what customers are looking for, what doesn’t work and what motivates entrepreneurs. It has required a focus on being demand-driven.
SolarNow’s management team concedes there are things it might have done differently in retrospect. Initial targets to scale may have been optimistic, and didn’t allow for adaptation or tweaking of the basic model with a core group of branches before rapid expansion. Maintaining simplicity and standardization of the model took a while to achieve, and the importance of constant communication with franchisees and customers – including regular follow-up – has dramatically improved. Modification of its rewards and incentive schemes has meant a focus on short-term economic benefits while using a structure that fosters peer group motivation. And engaging franchisees in better understanding the performance of the business and having a say in significant organizational change decisions has improved performance and morale alike.
Finally, the credit process is the most difficult part of an enterprise providing products beyond the cash-only reach of customers. Getting the right balance of franchisee involvement in the credit process improves accountability and ownership without impairing the ability to grow strong customer relationships. Developing a process that builds trust and fosters collaboration with the franchisee network, finding the right people and training them with a long-term vision, incentivizing them to perform well, all while balancing the roles and responsibilities of the credit process is a complex challenge indeed. With its continued expansion and burgeoning reputation, SolarNow is showing that it is a challenge that can be met.
IDCOL and Solar Home Systems in Bangladesh
While demand for small-scale renewable energy is virtually infinite, a small microfinance institution or energy enterprise needs capital to meet that demand with supply. The Infrastructure Development Company Limited (IDCOL) addresses this barrier to scale in a unique and exciting way. With massive infusion of government capital, management from the private sector and a unique asset finance model using creative partnerships, IDCOL has produced a stunningly successful program.Read
IDCOL is a Bangladeshi Government-owned financial institution that is implementing a large scale Solar Home System (SHS) Program with support from various local NGOs, MFIs and private entities. Consonant with the Bangladeshi Government’s vision of providing “access to quality electricity to all people at an affordable price by the year 2021,” the program’s objective is to fulfill basic electricity needs in the rural areas of the country.
Prior to IDCOL’s entering the SHS market, its primary remit was large infrastructure finance. IDCOL managed to move into the SHS sector with incredible success: in its first ten years, IDCOL installed over 2.7 million SHS in off-grid rural areas of Bangladesh. IDCOL aims to finance six million SHS by 2016, with an estimated generation of 300 MW of electricity. The program has been acclaimed as the fastest-growing off-grid renewable energy program in the world.
As IDCOL’s Director (Investment), Nazmul Haque, characterizes it, IDCOL is “a private company that is government-owned: a public-private partnership, or PPP.” The Bangladeshi government is the founder and investor, but the management is entirely from the private sector. Nazmul describes IDCOL’s initial involvement in renewable energy as “accidental and reluctant,” but with World Bank impetus it developed what was thought to be an aggressive pilot target of 50,000 SHS over five-and-a-half years. At the time, there were barely 7,000 SHSs installed in the whole country of roughly 150 million people.
The program exceeded targets dramatically. Fifty thousand SHSs were financed within three years – two-and-a-half years ahead of schedule. A subsequent internal target was set for one million systems by 2012 – which was reached two years ahead of schedule, by 2010. A further-revised target of six million was established for 2016. As of December 2013, IDCOL had financed 2.7 million SHSs (see Figure).
These kinds of results are not achieved without massive financial commitments. IDCOL has invested over US$500 million so far, with a billion dollars likely by 2016. Twelve million people have been reached, thirty thousand direct jobs created, and US$39 million in government spending on kerosene subsidies saved. To reach these numbers, IDCOL tapped an impressive network of financers. The program received initial loan and grant support from the World Bank (IDA) and Global Environment Facility (GEF); later on, German Technical Cooperation (GIZ), German Development Cooperation (KfW), Asian Development Bank (ADB), Islamic Development Bank (IDB), Global Partnership on Output-Based Aid (GPOBA), Japan International Cooperation Agency (JICA) and Department for International Development (DFID) came forward with additional financial assistance.
The Financing Model
IDCOL has developed a unique asset finance model for SHSs. It works through 47 partner organizations, or “POs,” comprised of NGOs, MFIs and other private entities on a national partnership basis. IDCOL provides low-cost financing and technical capacity-building support to the POs, which interact directly with customers. Certain components are essential to its success: ownership; multi-party financial contribution; market price determination; independent selection of POs and suppliers; and indirect subsidy to the consumer.
IDCOL’s beneficiaries become owners of their SHSs, buying them outright in cash or, more commonly, after completing their installment payments. This encourages proper use and maintenance and confers the long-lasting benefits of solar-generated power to the system owner. Over-utilization of the SHS is minimized by limited on capacity; the systems typically can supply electricity for only 4 to 5 hours during the night to run a few lamps, one black and white TV, one mobile-charger, and/or one DC fan. There is a good reason for this: restricting usage diminishes demand for customer support and keeps systems running in good order. Since customers are more likely to make installments to POs on well-functioning systems, they are therefore more likely to reach the ownership stage.
Multi-Party Financial Contribution
An important part of IDCOL’s program is ensuring that customers as well as POs contribute to the installation costs of the SHS. To procure an SHS, a customer makes a minimum 10% down-payment to the PO, which then installs the system. The remaining cost (90%) is a loan from the PO to the customer, who repays in installments. IDCOL refinances 70-80% of this loan amount, therefore reducing the PO’s outlay to approximately 18-27% of the SHS cost. This multi-party contribution ensures strong buy-in from all stakeholders, and aligns all three parties’ common objective: prompt and consistent repayment of the loan, leading to ownership.
This arrangement incentivizes the POs to provide quality after-sales service: they need to ensure customers are satisfied, so that they repay their loans. The POs have to manage funds for their contribution to the systems’ costs in order to manage further installations of SHSs and they also have to ensure a return on their equity contribution. Quality after-sales service is an important component of solar financing and serves as a marketing incentive as well.
Market Price Determination
Many programs fail because the market is controlled, artificial or manipulated. IDCOL’s approach has been to allow market forces to determine the price of SHS. While appealing in theory, the reality is that IDCOL continually monitors the prices that customers are paying as well as the component prices, and claims to require reasonable grounds for changes in SHS prices “without ever interfering in the determination of the price” – instead seeking competition between the POs and among equipment suppliers. Each PO has relationships with multiple suppliers for various SHS components, and POs are spread across the whole country. This is meant to ensure that all customers have access to a free and competitive market, on the basis of price, value, and quality of service.
Two autonomous committees select both POs and suppliers against strict criteria. IDCOL asserts that the selection committees are comprised of professional, experienced people, working in relevant areas, who are not connected to either POs or suppliers, and whose decisions are binding on IDCOL, whose only role is to provide secretarial support.
IDCOL believes that providing a direct subsidy to the consumer is riven with complexity and risk. An indirect process is simpler for IDCOL as well as for the POs, and gives the POs “the sense of creating value and profit.” In practice, IDCOL provides a small portion of the SHS cost as a subsidy to the POs for the sale of each unit, a subsidy intended to be passed-on to the customer. This subsidy is fixed for SHSs of less than 30Wp and is, at present, 12% of the SHS cost by weighted average. It is a progressive subsidy, meaning that poorer customers buying smaller systems benefit more from the grant support than wealthier ones purchasing larger systems.
Through subsidies, low-cost financing and competition among POs, the system automatically keeps small SHS prices from inflating. Because of the subsidy, POs can often price small systems lower than their actual purchasing cost, and they reduce the selling price as much as possible because of competition with other POs. Frequently, their lowest selling price will equal the purchase price minus the subsidy, and in this way the entire subsidy is passed along to the consumer. POs can afford to do this because they get their return primarily on the difference of the interest income (12-16%) on the loan that they offer and the interest at which that money is financed: IDCOL offers 6-9% financing for 70-80% of the loan that POs provide to their customers.
For systems over 30Wp, there is no subsidy. In this case, POs often sell the systems at a price equal to or slightly higher than their actual purchasing cost from the suppliers. Again, POs get their return on these systems primarily from interest income.
IDCOL as Incubator
Probably none of these features are unique; a rent-to-own solar model isn’t either. Arc Finance partner SolarNow is using this financing mechanism in Uganda – without the benefit of a Ugandan IDCOL to help it grow. But Bangladesh is likely to be the world’s first “solar nation” – with ambitious government targets for renewable energy, pioneering energy companies such as Grameen Shakti, special susceptibility to the consequences of global warming, and a rapidly developing, large population, Bangladesh is for solar what Kenya is to m-banking: the clear leader, and a petri dish for innovation.
Market factors and technological advances have also become more favorable for solar lighting. The price of kerosene and the quality of solar products both went up while the price of photovoltaic generation has plummeted. With the kerosene subsidy gap reduced, and the subsidy to the IDCOL end consumer being reduced too, Bangladesh now has a market almost perfectly conductive to commercial, competitive small-scale solar finance. An organization such as IDCOL is arguably a necessary, but not sufficient, criterion for reaching massive scale in small-scale renewable energy access. Marrying government support and funding with private sector expertise, dynamism and respect for competition has created an environment propitious to the economies of scale that come with reaching millions. Many other countries would benefit greatly from having their own equivalent of an IDCOL – the archetype for scaling up a nascent industry.
In sub-Saharan Africa, nearly 590 million people lack access to electricity, including eighty-five per cent of rural populations. M-KOPA Solar is seeking to change this. Based in Kenya, M-KOPA Solar (www.m-kopa.com) is an innovative asset financing company that sells small-scale solar home systems (SHSs) to off-grid households on an affordable, 12-month mobile money payment plan via hire purchase. As of February 2014, M-KOPA actively provided affordable solar power to over 50,000 Kenyan households – and is adding a thousand more households per week. M-KOPA has ambitious plans: it has just raised US$20 million to fund expansion of its customer base from fifty thousand to one million households by 2018.Read
M-KOPA was established in 2011 following successful consumer trials. Its three founders are experienced mobile technology innovators who believe in the transformative potential of affordable products designed for underserved consumers. They lead a team that includes over 200 staff, 1,000 field-based agents across Kenya and 75 retail shops. Over the next three years, they expect to expand to 300 more local staff and 2,000 more agents to help M-KOPA reach its target of one million households by 2018.
To capitalize on the advantages of using wireless micropayments for renewable energy products, M-KOPA developed M-KOPAnet, a proprietary technology platform that combines embedded GSM and mobile payments. M-KOPAnet rides on top of Safaricom’s world-leading, well-known m-banking and money-transfer platform, M-PESA, through which users can transfer money via mobile phone for as low as 5 Kenyan Shillings (US$0.06). A customer puts down an initial deposit followed by daily micropayments for up to one year, after which the customer own the system outright. Payments are made via M-PESA. A two-year warranty, from point of first purchase, is included. Being a pioneer in a pioneer market allowed M-KOPA to tap into M-PESA’s 20+ million customers. This was not blind luck. M-KOPA’s director of strategy and co-founder, Nick Hughes, is the former head of global payments at U.K.-based Vodafone Plc, which has a 40 percent stake in Safaricom and was, along with the UK’s Department for International Development, crucial in getting M-PESA from idea to implementation. Competitors Bharti Airtel Ltd., Telkom Kenya Ltd. and Essar Telecom Kenya Ltd. have since started operating mobile phone-based banking systems in the country.
M-KOPAnet distinguishes M-KOPA from other companies and allows the extension of credit to customers who do not have formal collateral or a credit history. It can do this because solar energy – aside from the health, security and educational benefits it brings – saves households money. A recent independent survey by TNS Research International Kenya reported that 97 percent of households who are paying for solar lighting from M-KOPA were saving money compared to what they had previously spent on kerosene. Meanwhile, M-KOPA reports a 95 percent repayment rate.
M-KOPA currently offers customers two systems: the d.light d10g SHS, a 4W system with three lights and phone and USB charging ports for which the user outlays a deposit of Ksh 2,500 (US$30), and pays Ksh 40 (US$0.50) per day for 360 days; and the d.light d20g SHS, a 5W system with three lights (two wall-hanging and one portable), phone and USB charging ports plus a chargeable radio for which the user deposits Ksh 2,999 (US$35) and pays Ksh 50 (US$0.60) per day for 360 days. When the system is owned outright at the end of the payment term, the user saves even further. When you combine this financial “no-brainer” with the convenience of mobile money for making regular, tiny repayments and the computational efficiency of processing these micropayments over an automatic network, you have a recipe for scale.
Plenty of organizations in various countries offer SHSs on hire purchase or incorporate PAYG technology. Essentially, M-KOPA has attracted attention for its combination of an affordable payment plan with mobile money. Kenya is the world’s leader in m-banking, with almost 20 million M-PESA customers – well over half of Kenya’s population, and representing, by some measures, half of the global m-banking market. As m-banking expands in other countries, many millions more customers will have the chance to access a credit facility for asset finance in an efficient, cost-effective way, with the regular, very small repayments that are so desirable for consumers with high income volatility.
Offering solar with a credit facility is extremely capital intensive, so M-KOPA’s recent US$20 million fundraising accomplishment is welcome news. Sourcing includes a US$10 million commercial-grade syndicated debt facility fronted by Commercial Bank of Africa (CBA). The collateral for the CBA-led loan is M-KOPA’s future cash flows from its customer payment plans – a remarkable securitization of a loan book composed of low-income consumers, who are sometimes without bank accounts or fixed residence, paid entirely through the Safaricom M-PESA system. This deal reflects the confidence the private sector now has in the credibility, demand, distribution and supply of small-scale solar in Africa, and the use of mobile micropayments to pay for it.
The other US$10 million comprises debts the Bill & Melinda Gates Foundation, LGT Venture Philanthropy, clients of Imprint Capital and Netri Foundation; grant funding from DFID in the UK, and the Gates and Shell Foundations; and re-investment by lead equity investors Gray Ghost Ventures. Funds are being used to scale-up sales and operations in East Africa and expand into other markets, R&D and business intelligence.
Several factors have contributed to M-KOPA’s success in tapping capital. The company has demonstrated proficiency in delivering the “airtime” concept, something with which Kenyan consumers are extremely familiar and comfortable. In addition, M-KOPA received international recognition when it won the FT/IFC Award for Excellence in Sustainable Finance in June 2013. Also worth noting is M-KOPA’s determination to always set its micropayments cheaper than the daily cost of kerosene, simplifying its marketing efforts. Finally, being based in a development “petri dish” such is Kenya allows the convenience of mobile money to make hire purchase and Pay-Go incredibly convenient.
M-KOPA is able to deliver to the market something absolutely desirable, which people intuitively understand, which will save them money, and which is convenient and easy.
Niki Armacost discusses Financing Solutions for Clean Energy in Latin America at the Americas Society/Council of the America’s 7th Microfinance Panel in New York City, January 30, 2014. She is joined by panelists Gregory Watson, Head, Strategic Planning and Team Leader, Clean Energy, Multilateral Investment Fund, Inter-American Development Bank and Amy Wang, Investment Officer, Global Social Investment Funds, Deutsche Bank Trust Company Americas. Moderated by Christian Gómez, Jr., Director of Energy, Council of the Americas.
Arc/REMMP’s five-branch energy finance pilot program begins in Uttar Pradesh
As one of India’s most successful and dynamic microfinance institutions (MFIs), Utkarsh is one of Arc’s most exciting partner organizations under its USAID-funded Renewable Energy Microfinance and Microenterprise Program (REMMP). The partnership offers a fantastic opportunity to “piggyback” Utkarsh’s nascent energy lending program on top of its underlying vigorous growth. Following a multi-month process, Arc Finance’s pilot program with Utkarsh has just begun renewable energy finance operations in Uttar Pradesh.Read
A non-banking financial company (NBFC) registered in Varanasi, Utkarsh was founded in August 2009 by Govind Singh, who has 26 years of microfinance experience across public and private sector banks and NBFCs. Utkarsh started its microfinance operations in September, 2009, and currently operates in five states through 118 branches, catering to more than 268,000 members, with a portfolio of Rs 246.76 crores (approximately US$40 million). Utkarsh operates in north-central India – Uttar Pradesh, Bihar, Madhya Pradesh, Uttarakhand and Delhi – where there is a large Below Poverty Line (BPL) population and relatively low competition from other NBFCs or banks.
Utkarsh has placed a strong focus on risk management, responsible finance and social performance, as evidenced by its “credit plus” activities, such as setting up health clinics and camps (with free medicines to members), vocational training, market linkage programs, and financial awareness initiatives through its NGO arm, Samutkarsh. Samutkarsh will administer the REMMP pilot, which will begin with rolling out solar portable lighting through cash sales and loans, and will provide credit to Utkarsh clients interested in purchasing solar lights. The lanterns will be promoted through Utkarsh’s network.
The delineation of responsibility between Utkarsh and Samutkarsh is an important part of the pilot and a potential model for current and future MFI partners introducing energy lending. Management established from the outset that the energy program would be rolled out under Samutkarsh to preserve a clear distinction between its credit and non-credit activities. Samutkarsh will conduct marketing of the lights: through demonstrations; aggregating demand for distributors; providing credit to Utkarsh clients to enable them to purchase solar lights; and distributing lights to members at branches. Utkarsh will provide support to Samutkarsh branch staff for marketing; follow up with Utkarsh clients for sale; and collect solar light loan installments at branch or center meetings.
Arc believes that there is far more to a successful energy finance program than just introducing products to clients and telling them they can get a loan: there are demographic, regional, product and timing decisions to be made and potential risks that need to be assessed. Utkarsh considers energy an area of high potential demand and impact among its mostly rural, agrarian clients in UP, however, across its geographical reach, grid connection rates are increasing. And while the level and reliability of service remains poor, the highly subsidized cost of grid electricity (and the common practice of illegal interconnection, resulting in free electricity – for some) may contribute to a low price reference among clients, which would in turn reduce willingness to pay for higher-cost alternatives. The persistence of the national and state governments in heavily subsidizing kerosene is a key factor in designing an energy pilot, and high levels of poverty and income insecurity among Utkarsh’s clients is an additional risk that may supress demand and result in low capacity to pay. Arc and Utkarsh carefully evaluated each of these potential risks in assessing the viability of an energy program.
The journey from idea to pilot rollout offers useful instruction in crafting an energy finance program and navigating potential pitfalls. Once Utkarsh had confirmed its interest in implementing an energy program planning proceeded with visioning sessions, market research to assess demand, selecting a product partner (with selection process training from the Arc team), and, with Arc’s support, pilot planning, including the development of an operational model and processes.
In August, Arc Finance oversaw a visioning and planning session with the Utkarsh team and agreed on a detailed activity plan for the following two months. Market research began, with focus groups conducted soon after. Product selection is as important a decision for a partner (and as important an element of Arc’s Technical Assistance) as any other. Getting the product choice right can open up immense opportunities. Getting it wrong can scupper a project before it’s off the ground – especially considering the large variability in solar lighting product quality available in India. Arc, which is product-agnostic, provided Utkarsh with a tool to rate the companies being interviewed, and during September, Utkarsh and Arc met with five product companies to decide on a product partner for the pilot.
With Arc’s assistance, Utkarsh produced an operational manual during October and November, with detailed processes for Utkarsh staff for rolling out the program. Utkarsh hired energy executives and staff, finalized process mapping, and conducted training within five pilot branches during November and into December. As the pilot program kicks off in the five initial branches, the coming year will focus on monitoring implementation and processes, evaluating after-sales service and impact, and, based on initial results, outlining plans for full rollout.
After several months of preparations, the program launched in a single branch on the 12th of December and sold its first lantern on 16th, only a couple of days after the first round of client product demonstrations. Three days later, 20 units had been sold. The pilot will expand to three branches within a month, and a further two soon after, bringing the pilot total to five: Harahua; Chandvak; Aurai; Lalganj; and Durgavati.
The program’s objectives are ambitious in scope: reducing or eradicating kerosene consumption in clients’ households; increasing productivity in daily activities; improving health conditions with use of eco-friendly energy products; and improving educational conditions for children. But Utkarsh is an organization well accustomed to managing growth, mitigating risks, hiring the right people, planning well and adapting rapidly to changing circumstances. It is very early days, but in Utkarsh, Arc has a partner organization of the very highest professionalism and vision, and we look forward to bringing you regular program updates in the months to come.
The Weaker Section Development Society (WSDS) is one of seven microfinance institutions (MFIs) that Arc Finance currently assists under its USAID-funded Renewable Energy Microfinance and Microenterprise Program (REMMP). A small but fast-growing, community-based MFI, WSDS operates in the central and southern districts of India’s northeastern state of Manipur and has recently begun finance and disbursals of solar home system components to underserved communities.
Innovations in Financing Small Scale Clean Energy, a full-day workshop organized by Arc Finance in conjunction with USAID and the Sustainable Energy for All Energy Access Practitioner Network, brought together a range of stakeholders to discuss the innovations in financing now being deployed in the small-scale, clean energy space. These sessions were made possible with generous support from USAID.
Mitra Ardron is CEO of Lumeter Networks, which is developing a variety of pre-paid electricity meters and cloud accounting services for renewable energy companies to build micro-grids and solar home systems (SHS) and extend service to the Base of the Pyramid. Renewable energy companies currently have trouble servicing this market because of the difficulty of managing small payments and the high degree of theft. Mitra spoke to Arc about how Lumeter has solved this through an ultra-low cost meter, which incorporates innovative tamper protection across micro-grids and facilitates pre-paid capacity for SHS as well.
The price of small solar systems in East Africa has fallen rapidly over the past decade, but US$70 for a two-light system is still too high for most off-grid households to pay upfront. It would be affordable for many more people with suitable financing to spread the cost, but microfinance isn’t always appropriate or available to fill this gap.
UK technology company Eight19 came up with an innovative way to spread the cost of a solar system: the Indigo pay-as-you-go solar home system that is activated by weekly scratchcard payments. The team spun out Azuri Technologies in August 2012 to promote Indigo in emerging markets.
Ben West is the co-founder and CEO of EcoZoom: a for-profit, certified B Corp, social venture company selling affordable wood and charcoal-fueled, highly efficient cookstoves in developing countries. EcoZoom works to empower local workforces, economies and women while creating financially sustainable markets and connecting themselves to all parts of the value chain. The company has 15 staff, and offices in Portland, Oregon and Nairobi, Kenya. To date, the company has sold more than 90,000 units to 14 countries, with key projects in 5 countries.
Before founding EcoZoom with co-founders Amanda West and Phil Ferranto, Ben managed the complete turnaround of the social venture company StoveTec. Ben earned an MBA from the University of Oregon, and before attending graduate school, Ben ran a US$20m account with 6 office staff and 150 truck drivers within the US$1bn company, US Xpress. Ben and his team have just finished setting up their offices in Kenya, where he currently lives with co-founders Amanda and Phil.
Ajaita Shah is the Co-Founder and Chief Executive Officer of Frontier Markets and the President of Frontier Innovations Foundation. Frontier Markets is a rural marketing, sales, and service distribution company that provides access to affordable and quality consumer durables to low-income households in India. Frontier Markets is currently operating in rural India and working primarily with clean energy products like solar lighting and smokeless stoves. With five years of microfinance experience in India with organizations like SKS Microfinance, and Ujjivan Financial Services, Ajaita has also worked on numerous development projects in seven Indian states.
Stima Systems is a Kenya-based energy startup that delivers affordable lighting and charging services to low-income off-grid customers using a distinct payment model: the group microlease. In this conversation Stima CEO Konrad App shares the origins of Stima’s model and provides insights into the power of groups to expand access and support commercial viability.
Solving the “last mile” problem – or providing renewable energy and suitable finance for it to the Bottom of the Pyramid – is far more collaborative than competitive. You can see this clearly in the network of partnerships we at Arc Finance have developed for our current portfolio of projects: we link energy companies, MFIs, technology providers, remittance companies and other distribution organizations to facilitate access to finance for renewable energy for the un(der)electrified billions whose lives can be improved.
Collaboration and partnership were among the key themes of the 2013 Ashden Awards held in London last week. We are proud to be a supporting partner of Ashden and were thrilled to attend the awards, which are among the most prestigious for sustainable energy solutions. Projects awarded ranged from partnerships at the local level (UK-based initiatives such as encouraging cycling or recycling in cities, or developing green spaces) to global projects that try to leverage new technologies, financial innovations and the brightest of ideas in order to scale access to affordable renewable energy to those who need it most: the poor. The conference was a great opportunity to share ideas, contacts and build further partnerships. Collaboration might be a tedious and overused bit of management-speak, but in this space, it is the sine qua non of progress.
This day-long, pre-event workshop, held in conjunction with the 2013 Microcredit Summit in Manila, was organized by Arc Finance and brought together high-level representatives from MFIs, energy enterprises, government entities and donors to engage MFIs on financing renewable energy. This video series was made possible with generous support from USAID.
SunnyMoney is a social enterprise that was spun off from the NGO, Solar Aid, in 2011. While Solar Aid focuses on installing solar systems into schools across several countries in Africa, SunnyMoney focuses on selling solar lanterns. In just a few years since its launch, SunnyMoney is already reaching sales levels of tens of thousands each month, growing very quickly in Kenya, Tanzania, Malawi and Zambia. The company employs a unique sales and marketing approach called “The SunnyMoney Way,” which works closely with education authorities, incentivizing head teachers in geographically defined regions to promote the benefits of solar lanterns to their students and families. Orders are then collected and the lights delivered in follow-up sales visits by SunnyMoney team members, during which thousands of lights can be sold in a single event.
SunnyMoney’s Managing Director, John Keane, talks to us about the excitement and hard work of the transformation of SunnyMoney from an NGO program into a social enterprise, and now the daily challenge of supporting its growing success.
Big surprises sometimes come in small packages and Angaza Design embodies this maxim. Led by CEO Lesley Silverthorn Marincola, the three-person team had already launched in five countries with its innovative SoLite solar lamp when it encountered the affordability barrier. Unfazed, the team pivoted and turned its engineering skills to developing and testing a new concept in pay-as-you-go solar energy. Lesley spoke to Arc Finance about how the human-centered design and can-do approach of companies such as Amazon – where she worked on the early generations of the Kindle e-reader – can be applied to seemingly intractable renewable energy problems with impressive results.
INENSUS is a young, off-grid energy company based in Germany that develops solar/wind-hybrid microgrids for developing countries’ remote rural regions. The company’s “Micro-Power Economy” model, currently being employed in Senegal, centers on supporting both income-generating as well as household energy activities to truly catalyze local village economies.
Arc Finance recently caught up with Jakob Schmidt-Reindahl, managing director of INENSUS’ Senegal operations, to discuss the company’s clients, pre-payment approach, and role that microfinance plays in helping to realize the micro-energy economy.
Fenix International is a Silicon Valley based renewable energy company that designs and manufactures income generating energy solutions for mobile telecoms in emerging markets. The company has developed the ReadySet, a plug-and-play smart battery that charges by solar panels or bicycle dynamo to power mobile phones, lights, and many devices powered by USB or Car Lighter Adapters. The ReadySet is sold by MTN, Africa’s largest mobile phone company, through its network of retail outlets in Uganda. The end customers are micro entrepreneurs who use the ReadySet to make additional income from charging phones in off-grid rural areas.
In a conversation with Arc Finance, Brian Warchawsky (Chief Operating Officer) and Peter Glenn (Business Development and Sales Manager) explain how Fenix combines its core skills to ensure that its products work not only for the customer, but for the whole chain from manufacturing, to distribution and financing.
Founded in 2010, Solar Sister is an energy company that promotes access to affordable solar lamps and small solar systems in communities in Sub-Saharan Africa. Using an Avon-style distribution system, Solar Sister builds and extends the supply chain through women’s rural networks by providing women with a “business in a bag”: a start-up kit of inventory, training and marketing support.
Arc Finance talks with Katherine Lucey, CEO of Solar Sister, about the process Solar Sister uses to support rural women to become micro-entrepreneurs and how it enables rural women to earn an income in a flexible way, doing as much or little as their circumstances and preferences dictate. Due to the pioneering work of Solar Sister, renewable energy gets to even the most remote villages, women are empowered and supporters are satisfied. In this extract, Katherine discusses, among other things, village level cash management, the importance of mobile, and learning to let her entrepreneurs set their own pace.
Since its founding in 1984, the Negros Women for Tomorrow Foundation (NWTF) has explored a range of ways to live up to its mission of helping poor Filipino women achieve self-sufficiency and self-reliance. NWTF offers an impressive array of products, including micro-loans to assist micro-entrepreneurs, insurance and student loans, and continues to look for innovative products and services to meet the needs of its clients and grow the organization.
Arc Finance talks with Raymond Serios, Director of Research at NWFT, about how the MFI embraced energy lending as a way to expand its mission and find new ways to grow and attract customers. In 2009, Arc Finance helped the organization launch its energy loan portfolio, and since that time the program has changed in a number of ways as NWTF has learned more about client demands, and as energy products have continued to diversify and evolve. In this extract from a wide-ranging interview, Raymond reveals how NWTF’s business strategy and operational approach to energy has transformed over time, moving from a narrow focus on consumer credit to a model in which members are trained and financed as energy product sales agents.
The Negros Women for Tomorrow Foundation (NWTF) is a one of the Philippines’ oldest and largest microfinance institutions, serving nearly 140,000 clients across the nation’s central island region. Among institutional practitioners of energy microfinance NWTF is notable for its inventive, trial-and-error approach to problem-solving and program development, and its patient, long-term commitment to building a strong, high impact and commercially sustainable model. In this episode, Raymond Serios provides a nuts and bolts account of how the MFI draws on experimentation, client feedback and a close study of the evolving clean energy market to adapt and build its successful energy lending program.
Founded in June 2010, Milaap is a Indian start-up based in Bangalore that crowd-sources low-cost capital for microfinance institutions through its online platform as well as social funds, high net worth individuals (HNIs) and corporate partnerships. Funds are not donations, but rather micro-loans between a growing global network of contributors and low-income Indian borrowers. Milaap sources capital exclusively for non-traditional, value-added product portfolios, supporting investments in water and sanitation, vocational training, and SME capital.
In 2011, Milaap added energy lending to its portfolio when it established a partnership with DCBS, a small MFI based in West Bengal (India), and Onergy, a leading solar integrator in the region. Milaap has also made plans to partner with Karnataka-based Grameen Koota, one of India’s largest MFIs, to co-fund its growing energy lending program.
Arc Finance recently caught up with Milaap co-founder Anoj Vishwanathan to discuss the company’s origins, its growing focus on energy, and the core value proposition that it offers its MFI partners in the challenging environment of the post “microfinance crisis.”
Product R&D and design, high volume manufacturing, global distribution, sales and marketing – this is the range of one of the world’s best known micro solar companies, d.light. Since 2006, the company has been developing and distributing high-quality, solar portable lighting products to low-income, off-grid customers worldwide. Ned Tozun, d.light’s President and Co-Founder, recently took some time to speak with Arc Finance about the company’s growth, its approach to distribution and marketing, and the role he sees for microfinance in making improved energy affordable for d.light’s target customers.