By Simon Collings
Crowdfunding is playing a critical role in energising the African continent and it’s been a subject of increasing interest in recent years. Crowdfunding for energy access initiatives is still at an early stage, and is often poorly understood. The amounts of money being raised currently are small compared to the overall financing needs of the sector. However, the crowd can potentially play an important role alongside other types of financing.
Over the last three years, Energy 4 Impact has been researching crowdfunding by energy access ventures, with funding from UKaid. According to our analysis, in 2016, energy access focused projects and businesses globally raised $8.7 million through crowdfunding. Although this was an impressive 156% increase from the previous year, the amount is a drop in the ocean compared to the billions of euros the UN estimates Africa alone needs to achieve universal access to modern energy. Yet, Energy 4 Impact’s Crowd Power programme’s reports reveal the crowd can play a catalytic role in bringing sustainable energy to all.
Despite small numbers, crowdfunding can and is helping to solve Africa’s energy access challenge, mainly through supporting start-ups and early stage energy access firms. The crowd provides vital capital needed by these ventures to grow to a point where they can begin to access more conventional sources of funding. This is where the crowd plays a catalytic role. The M-Kopa story is well known in our sector, but we need many more ‘M-Kopas’. The crowd is helping to support the emergence of a broader array off market actors, a critical development needed to address energy access demand.
In two reports entitled “Mapping the market for energy access” and “Can the crowd close the financing gap?”, available on Energy 4 Impact’s publications page, Crowd Power explores the role that energy access crowdfunding plays in sub-Saharan Africa and Asia while providing advice for social enterprises and non-profits looking to raise funds. The reports analyse crowdfunding trends through different platforms and illustrate that energy access crowdfunding is best suited in assisting start-ups and smaller energy access firms.
Crowd Power has already been doing some important work in these areas. So far the initiative has supported 100 campaigns on ten different platforms – including Kiva, Bettervest, Trine and Lendahand. These campaigns are all supported by UKaid match funding and have so far provided 240,000 beneficiaries with access to clean energy. The businesses and non-profits raising funds through these platforms work in 28 countries including Eritrea, Kenya, Mozambique, Namibia, Nigeria, Sierra Leone, Tanzania, Uganda, Zambia, Zimbabwe.
Energy 4 Impact has also helped set up the first UK crowdfunding platform where UK investors can lend to businesses providing off-grid energy access in Africa. Again this is with UKaid support, and the backing of Virgin Unite Foundation. Launched by two of Europe’s leading crowdfunding platforms, Lendahand and Ethex, Energise Africa is now enabling UK citizens to invest in businesses that install solar systems in homes in sub-Sahara Africa. The platform aims to raise GBP 20 million in the next three years, providing renewable energy solutions to more than 110,000 families and small businesses. In just 5 months, the platform has raised over GBP 1 million from UK investors.
Some of the initiatives supported under Crowd Power have been focused on an important aspect of energy access – productive use of energy to support economic development. Energise Africa will over the coming year diversify into offers which go beyond solar home systems to include productive use applications of solar PV in activities such as solar irrigation and food processing among others.
Energy 4 Impact is currently in the process of finalising its third Crowd Power report entitled “Crowd Power, Success & Failure – The Key to a Winning Campaign”. The report will offer crucial advice on how to develop a successful crowdfunding campaign. Two further reports are planned, one looking at the characteristics and motives of crowd investors in the energy access space, and a final report mapping changes in the sector over the three years of the project. These reports will be available in the next few months, so watch this space.
Simon Collings is Director of Learning and Innovation at Energy 4 Impact (www.energy4impact.org).