Innovative financing will provide electricity to 1.9 million people

January 21, 2021

Solar energy in combination with batteries provides new opportunities for people in developing countries without access to the grid . Through a new financing facility, Norfund will contribute to as many as 1.9 million people gaining access to electricity.

The combination of increasingly cheaper solar panels, batteries, LED lamps and other energy-efficient products has made distributed solar solutions more accessible in the world’s poorest countries.

Norfund is now entering into a new facility, that will enable the solar energy provider d.light to provide electricity to as many as 1.9 million people.

Poor households buy their own solar systems

d.light’s business model is that the consumer buys a solar system which they pay down via their mobile phone. While the household previously spent the corresponding amount weekly on kerosene, they now spend the money on becoming owners of their own solar system. Once the system is paid off, they will have free power.

Flexible working capital enables d.light to offer more solar systems

With this business model, where the customers have a long repayment period, d’light becomes dependent on borrowing a lot of money. The interest d.light must pay from the solar system is sent from the manufacturer until it is repaid by the customer, is decisive for how affordable solutions can be offered – and thus how many can access them.

Since 2016, Norfund has been an equity investor in d.light – one of the largest players in off-grid solar energy. Norfund has now contributed to a new innovative solution to ensure the company access to flexible and affordable working capital.

While d.light until now have had to work hard constantly applying for new small bank loans, the new facility from Norfund will finance the purchase of d.light’s accounts receivable. This means that it takes shorter time from d.light pays its suppliers, until they get the money back into their account.

Kristoffer Valvik, Senior Associate – Clean Energy in Norfund.

The new solution also allows the company to plan long-term based, knowing that they have capital available at a reasonable price.

The company that Norfund has financed is called Brighter Life Kenya 1 Limited. It is structured to provide d.light Kenya financing in local currency, Kenyan shillings.

– Postponing the handling of outstanding loans in this way is a well-known way of protecting a business against credit risk and reducing working capital requirements here in Norway. However, as far as we know, this is the first time this has been done on this scale within decentralized energy in developing countries, says Valvik.

The investment is expected to contribute to:

  • improved energy access and economic inclusion for 1.9 million people who do not have access to the grid in Kenya
  • NOK 800 million in increased revenues for the Kenyan economy
  • Over 600,000 tonnes of CO2 in avoided emissions

Norfund’s loan is in addition to the loan United States International Development Finance Corporation (DFC) contributed in June 2020 of NOK 170 million. Norfund’s entry with NOK 128 million means a significant strengthening.

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