Image: Azuri Technologies Ltd
Energise Africa enables renewable energy and clean technology companies operating across the African continent and beyond to raise flexible, affordable finance by issuing bonds via the platform. Companies get access to a tranche-based credit facility of £750,000 - £5million, for working capital or tailored receivables financing. Funds are raised by running campaigns on the platform (anything from £100,000 – £1million per tranche), and the Energise Africa community of over 4,500 everyday investors can then choose which campaigns to invest in.
A retail investor as an individual who is investing for themselves (i.e. not on behalf of an institution or fund). This can include high net worth and sophisticated investors.
Energise AFRICA
What kind of innovative financial instruments does your organisation use?
Energise Africa is a UK-based retail impact investing platform, established as an innovative approach to catalyse private finance for climate action and the UN Sustainable Development Goals. We set an intentionally low minimum investment amount of just £50, and with our simple to use online platform, enabling everyday people to participate in impact investing. We are truly “crowding-in” private finance.
The lack of accessible and affordable finance is a major barrier to countries (particularly emerging markets) rapidly transitioning to low carbon economies, At the same time, according to research by UK aid many people in the UK want to put their money into more ethically and environmentally sustainable financial products, but can’t find suitable ways to do so. As result, retail investors are really a highly motivated, yet “untapped” source when it comes to SDG finance. We focus on innovative ways of connecting companies in Sub-Saharan Africa with retail investors in the UK, through both the technology we use and the new financial products we are developing.
Essentially, Energise Africa enables renewable energy and clean technology companies operating across the African continent and beyond to raise flexible, affordable finance by issuing bonds via the platform. Typically, companies will have access to a tranche-based credit facility of £750,000 - £5million, for working capital or tailored receivables financing. Funds are raised by running campaigns on the platform (anything from £100,000 – £1million per tranche), and our community of over 4,500 everyday investors can then choose which campaigns to invest in. Our technology aggregates all of the individual investments into a single disbursement, so for companies using the platform, it’s a fast and effective way to access finance.
Since launching in 2017, we have raised over £30million in investments for renewable energy companies operating in sub-Saharan Africa and other emerging economies – providing the vital finance needed to put clean energy within the financial reach of ordinary families and businesses. This money has enabled over 860,000 people in low-income, off-grid communities to gain access to clean, affordable energy. We estimate that as a result of energy access, these households have been able to generate an additional US$22 million in income.
What have you learned through the course of designing and implementing these structures? What's working, what's not?
Crowd-finance and retail investment is still seen as fairly niche, and many companies, institutional, and impact investors don’t necessarily recognise the huge potential it has to contribute to SDG financing. In reality, the total UK market volume for alternative finance is £billions. With our parent companies, Ethex and Lendahand, we have raised over £200 million for socially and environmentally impactful projects around the world – that’s more than many traditional funds! And the appetite for this type of investment is really picking up pace – investment offers on Energise Africa can be fully subscribed within a few days. We have proved the concept that retail investment can be a credible and significant source of SDG finance, so now we’re looking at new innovations to take it to the next level.
In terms of key challenges, we see that most companies operating in emerging markets would prefer to raise finance in US dollars (USD) or their local currency, but our investors are providing British pounds sterling (GBP). We have to be mindful that most of our registered users are not professional investors, and we have a duty of care to them which means it’s not really suitable for us to allow them to invest in unhedged foreign currency campaigns. We are working on innovative hedging products that would allow our investors to make and receive payments in GBP, while issuers receive disbursements and make repayments in foreign currency. Blended finance approaches (with Governments, Foundations, and institutions providing finance alongside individual retail investors) are key to making these products work, and keeping the cost of finance affordable for companies using the platform. We’re taking a really pioneering and collaborative approach to blending institutional and philanthropic money with retail investment – working in innovative ways to reduce the risk associated with emerging economy investments, but it’s definitely a challenge to bring new products to the market in a highly regulated environment like the UK.
If you use blended finance, tell us about some of the innovative partnerships you have employed
Energise Africa has worked with partners including UK aid, Good Energies Foundation, Virgin Unite, and Partnerships for Green Growth & the Global Goals (P4G) to develop a range of blended finance models. We started by using match funding from our partners, who invested 25-50% of the overall campaign target. The presence of a reputable investor in our campaigns helped build the confidence of our retail audience in the early days of the platform.
We also created a guarantee for new investors with support from the Good Energies Foundation and UK aid. We now guarantee capital for first investments up to £100. This means if an investee business is not able to make repayments and goes into default, a pool of capital has been set aside which can be utilised to make a repayment to each new investor up to £100. We found that this investor guarantee not only increased the number of new users coming to the platform, it also increased the amount that they were willing to invest.
Currently, we are developing new foreign exchange products - concessional capital from our partner organisations enables us to protect our investors and investees from foreign exchange risk, while keeping the cost of capital affordable. We hope to launch our first fully hedged USD transaction this year, and are working to scale-up this facility significantly in 2023.
We’re very fortunate to work with partners like Good Energies Foundation, P4G and UK aid who are willing to support innovative solutions and test new products. We’d love to see philanthropic organisations being more flexible about how they can deploy their funds to achieve impact - charities and philanthropies sometimes struggle with the idea of an organisation that they’re involved with not also being a charity or NGO, but profit for purpose organisations like Energise Africa can be instrumental in scaling sustainable solutions to the SDGs.
We’ve shown how we can use donor funds to leverage four or five times the amount in retail capital, and we really believe that with the right blended finance partnerships, Energise Africa can raise £billions to finance climate action and fuel green economies in the region.
