Kenya, Nigeria and Uganda are in the top five countries for debt crowdfunding capital raised in 2023 for energy projects run by especially Small and Medium Enterprises (SMEs).
This data was gleaned from Energy 4 Impact’s research programme, Crowd Power’s State of the Market Report 2023-2024 released earlier this year.
The programme examines the role of crowdfunding in supporting the growth of the energy access sector.
“Crowdfunding has become a crucial source of financing for SMEs operating in the energy access sector in developing countries.
“Since 2016, debt crowdfunding has raised over $300 million for energy access projects. Despite a decline in crowdfunding volumes in 2023, debt crowdfunding has remained stable, sustaining the five-year average.”
The report highlights how energy access crowdfunding has demonstrated resilience and adaptability amid shifting macroeconomic conditions.
Kenya, Vietnam, Nigeria, Uganda and India – attracted 70% of debt crowdfunding capital in 2023
It notes that debt crowdfunding has raised over $300 million for energy access-related projects since 2016.
“Annual debt crowdfunding volumes have hovered around $50m per year over the last five years, except for 2021, which saw a record $59m raised. Debt crowdfunding volumes were $48m in 2023, down 5% from the $51m raised in 2022.”
The report says the stabilisation of debt crowdfunding volumes is encouraging; “however, at the same time, the market appears to be at a critical juncture.”
Have you read?
Scaling up finance to grow emerging economies’ energy systems
Commercial & Industrial transactions increasing
This is due to changing macroeconomic conditions resulting in higher interest rates for borrowers and lower risk-adjusted returns for lenders.
“These issues are compounded by exposure to non-performing loans, particularly among some solar home system borrowers. Debt crowdfunding platforms are currently facing the challenges of building a diverse loan portfolio and managing risk, while simultaneously expanding their investor base and keeping operating costs low.
“In response to market challenges, some platforms are pivoting away from SHS company borrowers and increasing exposure to C&I [Commercial and Industrial] scale solar.”
The report points out that in many countries, there is a higher volume of C&I transactions; they also offer a different risk profile to SHS companies, as off-takers are businesses rather than individuals.
Commercial and Industrial transaction volumes increased by 14% in 2023 to $28m.
Changing nature of energy funding needs
In 2023, energy efficiency-focused campaigns emerged as a new sub-sector, raising $2 million. There is growing heterogeneity among debt crowdfunding platforms in terms of fundraising trends, the report says.
In 2023, Charm Impact and Energise Africa experienced a 49% and 42% drop in fundraising volumes, respectively.
In contrast, energy access-related fundraising on bettervest and Goparity increased by 26% and 42%, respectively.
Among the 11 debt platforms tracked for the report, six experienced a drop in volumes in 2023.
Two of the five platforms that increased fundraising – Solylend and frankly.green – had no activities in energy access in developing countries in 2022.
In late 2023, frankly.green suspended new fundraising as they were unable to generate a sufficient pipeline.
“Due to the changing nature of the market, we did not see congruent trends emerge across platforms in 2023,” says the report.
Strategies pursued by different crowdfunding platforms
The report says that while the data currently shows little variation in the characteristics of non-C&I and C&I loans, “we expect this trend to shift as Commercial and Industrial volumes increase in the coming years.”
In 2023, there were 135 C&I campaigns and 93 larger ticket non-C&I campaigns (>$30,000).
“We expect C&I loans to continue to dominate the energy access-related debt crowdfunding market because there is a larger pipeline of attractive risk-adjusted investment opportunities among Commercial and Industrial borrowers. Non-performing loans among some SHS borrowers have forced several platforms to pivot.”
Have you read?
Climate finance in Africa still below what is needed
The report says that in 2023, 269 energy access-related debt campaigns were conducted. This almost matched the 273 campaigns in the previous year.
“The number of unique borrowers also remained stable, with 123 in 2023 and 128 in 2022. There were 41 campaigns below $10,000 in value…
“Additionally, 55% of campaigns in 2023 were valued between $100,000 and $500,000, accounting for 60% of funds raised.
“Meanwhile, 36% of the campaigns were below $100,000 in value, accounting for only 8% of the funds raised.
“Only 9% of the campaigns were above $500,000, but these campaigns accounted for one-third of volumes. The average debt campaign size was $178,882 in 2023.”
Who are the top energy access-related borrowers?
The report also lists the top five energy access-related borrowers which raised 27% of debt funds, totalling $13m, and the top 10 who raised 39% of debt funds.
“There is significantly less borrower concentration among debt crowdfunding borrowers compared to the off-grid energy sector as a whole, where the top seven companies famously ‘hog’ over 70% of capital raised.”
The top five borrowers on debt crowdfunding platforms are located in Kenya and Nigeria.
The report says the market is geographically concentrated. Five countries – Kenya, Vietnam, Nigeria, Uganda and India – attracting 70% of debt crowdfunding capital in 2023.
Have you read?
Nigeria: Climate finance needed to tackle flooding, drought threats
Crowdfunding success stories
The top 10 countries attracted 89% of all debt funds.
Sub-Saharan Africa attracted over 50% of the debt capital, while Southeast Asia (including India) and Latin America attracted 30% and 15% of the funds, respectively.
Kenya had the highest concentration with 67 campaigns conducted and $12.1m raised, followed by Vietnam with 44 campaigns and $10.5m raised.
During a recent Energy 4 Impact webinar, African borrowers shared their first-hand experiences of crowdfunding.
Emma Wasirwa from LPG cooking company WANA Energy Solutions – Wesgas commended the speed with which bettervest helped them raise €300,000 in three months.
Segun Olumuyiwa discussed how the flexible ticket sizes and efficient due diligence offered by Trine and Energise Africa helped Bisedge rapidly scale their electrified logistics business.
Crowd Power history
With funding by UK aid from the UK government, via the Transforming Energy Access platform, Mercy Corps – Energy 4 Impact has delivered the Crowd Power programme since 2015.
The programme aims to grow energy access crowdfunding by addressing systemic and operational challenges faced by fundraising companies and crowdfunding platforms.
Over the past nine years, Crowd Power has helped 72 energy access companies raise over $26m on 15 crowdfunding platforms.
The current iteration of Crowd Power will run until 2027 and says it will continue to follow a demand-led approach, reflecting the needs of platforms and companies in this fast-evolving market.
Access Crowd Power’s State of the Market Report 2023-2024
Now watch
Image: One of the projects Energy 4 Impact is involved in.
Source: Energy 4 Impact/X
Sign up for the ESI Africa newsletter
Subscribe to the newsletter for free and join over 50,000 readers using ESI Africa as their news source for marketing development on all things related to power and energy.
