In Uganda and Ethiopia, CIDR Pamiga is working alongside actors from the solar energy sector to make impact investments easier and ramp up access to renewable energies.
CIDR Pamiga’s programme in Uganda and Ethiopia is designed to help actors in the solar energy sector meet their financing needs by leveraging its expertise in finance and microfinance. “We’re finding that there are plenty of financial institutions in both countries keen to provide finance, as well as a large number of companies that distribute, assemble or manufacture solar solutions and need access to finance,” explains El Mansour Magah, the CIDR Pamiga project leader.
Assisting with business models
From late 2018 to late 2019, CIDR Pamiga was tasked by the United Nations Capital Development Fund (UNCDF), which is responsible for microfinance, with a fieldwork project reaching out to businesses and financial institutions as part of its CleanStart programme. The goal was clear: to jump-start access for all, particularly low-income households, to solar energy by facilitating access to finance for companies in this sector.
“We focused on a dozen companies whose strengths and weaknesses we’d already analyzed,” says El Mansour Magah. “Much of the help we provided centred on fine-tuning their business models to smooth their access to financing.”
In-depth analyses looked at the structure of the companies’ balance sheets as well as, on occasion, their overall strategies. “We reigned in a few that were overly ambitious, wanting to set up in every province instantly. We explained to them that you first have to meet the needs in a market before looking to expand,” explains El Mansour Magah. The companies benefited from comprehensive support that maximized their chances of raising funds, via debt financing or capital investment.
Helping banks to grasp the challenges companies face
The programme also ran awareness-raising actions aimed at financial institutions to help them understand the specific nature of the renewable energy sector.
“Banks sometimes found it hard to understand the financing resources these companies need, as well as their operating models that require large amounts of working capital.”
In Ethiopia, the project concentrated on around 20 microfinance institutions and banks, educating them about the challenges and problems facing the sector and how to adapt their credit request analyses to the specificities of solar energy companies. The training proved very successful.
The CIDR Pamiga initiative succeeded in introducing more fluidity in interactions between various partners in the sector, leading to more effective collaborations.
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