Stimulating Local Capital for “Pay as You Go” Energy Access Companies
Woodvale Grove, Nairobi
July 13 2016
Develop a planon how international Development Financial Institutions (DFIs) and donors working in Kenya can leverage their existing relationships with local financial institutions and public organizations to provide support to the rapidly growing “pay as you go” (PAYG) industry in providing energy access to the underserved populations of Kenya.
The “pay as you go” companies have developed technology that allows households to use renewable energy systems without paying cash upfront or taking out loans: consumers consume renewable energy through an affordable leasing or a fee for the service arrangement. The model uses information technology enabled automated payment with remote activation.About three hundred thousand households have already benefited from these systems in Kenya. This entrepreneurial activity has been generously supported by private sector investors. According to our research, 17 foundations, 21 impact funds, four venture capital funds, two corporate venture capital funds and eight large companies have invested in the PAYG companies in East Africa.
Local banks are however, still reluctant to provide debt to PAYG companies.PAYG companies raise debt in international markets, which exposes them (and their customers) to currency risks and forces them to build complex and costly financial structures. This represents a substantial constraint to the growth of existing companies and also creates an entry barrier for other entrepreneurial organizations to solve the energy access challenge in Kenya.
International DFIs have the necessary wherewithal to resolve this constraint. The World Bank for instance has channeled local debt through the IDCOL model in Bangladesh. To ensure the correct utilization of funds and timely repayment, a monitoring and evaluation system was set up. This programhas led to the installation of over three million Solar Home Systems in Bangladesh.
The convening aims to answer three inter-related questions:
- Can, and if so, howwill international DFIs support local banks in Kenya in the PAYG sector?
- Can donor community support organizations like the Rural Energy Authority (REA) develop monitoring and evaluation systems to ensure targeted deployment of public funds?
- Can, and if so, how will international DFIs and donors accelerate private sector investment in this sector?
The convening will be focused and, in order to facilitate a constructive dialog, we propose the following set of participants from:
- DFI and donor country offices in Kenya
- DFI teams who manage the relationships with local banks (situated in international head offices)
- Local banks
- Private sector investors in energy access
- The Rural Electrification Authority
- Industry associations supporting entrepreneurs(GOGLA)
- Local incubators
|8:30 am- 9:00 am||Registration|
|9.00 am- 9:05 am||Welcome||Davida Wood, WRI|
|9.05 am- 9.15 am||Participants Introduction||All|
|9:15 am-9:30 am||Presentation of the WRI-NV research and recommendations for DFIs and donors||Need for local bank lending backed by monitoring and evaluation||Sanjoy Sanyal, New Ventures|
|9:30 am-10.30 am||Discussion on the importance of pay as you in providing energy access in Kenya & evaluating recommendations against current DFI and donor initiatives||Current initiatives of DFIs and donors. Do current initiatives encompass support for local financing? Is it important? What are the challenges?||The World Bank, IFC, DFID, KfW, USAID|
|10:30am-10:40 am||Presentation on the survey of local financial institutions on their interest and challenges in financing pay as you go companies||Is there interest from the banks to lend to this sector? What is the support they would need?||Nsinazo Warrakah, FinSmarts Consultancy|
|10:40 am-11.30 pm||Discussion on local financial institution participation in the PAYG sector||How would current lending criteria make it difficult to lend to the sector? What is the support that banks would need?||Kenya Commercial Bank, Diamond Trust Bank, Prime Bank, Kenya Women’s Microfinance Bank, CIC Bank and NIC Bank Moderator Paul Kihiu, AntHill Bees Ltd.|
|11:30 pm- 12.15 pm||Stimulating local private capital in the PAYG energy access sector||Current experience of lending and investing in this sector? How can larger amounts of capital be moved in? What are the risk mitigation issues?||Alexander Bashian, Responsibility, Charlotte Ward, Lundin Foundation,
Mark Roesink, Oikocredit
Moderator Andreas Zeller, Open Capital Advisors
|12.15 pm- 12:30 pm||Presentation on managing foreign exchange risks in pay as you go financing||Managing foreign exchange risks in the sector||Luz Leyva, MFX Solutions|
|12:30 pm- 12:45 pm||Presentation on managing risks through measuring performance via KPIs||Defining and using a set of universally understood metrics||Anna Lerner, the World Bank|
|12:45 pm- 1:00 pm||Next steps & closing remarks||Inputs to WRI’s research and action agenda||Davida Wood, Sanjoy Sanyal with participant responses|