Financing Private Sector to accelerate access to transformative Solar Home Systems in Somalia
Unsustainable patterns of energy production and consumption threaten not only human health and quality of life, but also affects ecosystems and contributes to climate change. In Somalia, more than 11 million people do not have access to electricity. There is heavy reliance on expensive and environmentally hazardous diesel or oil for energy and to some extent fuel wood for cooking and lighting in rural communities.
Sustainable energy, however, not only tackles these challenges head on, but also acts as an engine for poverty reduction, social progress, equity, enhanced resilience, economic growth, and environmental sustainability. Private sector and market-based approaches are critical for sustainable energy supply to rural communities in Africa.
Access to finance is expensive due to the unstable political, social and economic situation. The Somali market has a very high perceived level of risk, with off-grid players being charged significantly higher interest rates compared to their counterparts in neighbouring Kenya. Assistance in resolving the problem of high interest debt could lead to scaling up of operations across the sector.
In an industry that is extremely capital constrained, AECF recognises that finance is one of the drivers that will enable companies meet the growing demand, for affordable, sustainable clean energy more so in the underserved rural markets. Start – ups require seed finance in form of grants, competitively rated and subsidized loan facilities. This mix of financing helps catalyse the energy market.
However, due to lack of legal recourse and established finance mechanisms, the risk to donor funds is quite high. AECF supports private sector companies to accelerate access to transformative solar home systems to rural markets in selected countries in Africa through REACT Household Solar programme. The Programme provides grants and interest free loans to private sector companies in the solar home systems industry to scale their businesses to costly and logistically challenging rural markets in five target countries and Somalia is one of the countries. Selected companies will receive between US$ 100,000 to US$ 1.5 million based on their financing needs and ability to absorb the funds over a period of 5 years. The competition was launched on 3rd April and will close on 31st May 2019.
With no obvious tools for financing off – grid solar in the country, the programme will leverage on designed risk profiling mechanisms existing in the market. In addition to financing, the selected companies will benefit from technical assistance and additional investment brokerage support.
Worldwide, more than 1.1 billion people remain without access to electricity, while in sub-Saharan Africa, more than 600 million people remain without access to electricity.
AECF’s work on energy corresponds to the main targets of Sustainable Development Goal (SDG) 7 on energy: ensure universal access to affordable, reliable and modern energy services; works with countries to make energy systems and usage more efficient; and works to increase the global share of renewable energy. REACT Household Solar Programme is funded by United Kingdom government under the Africa Clean Energy Business Initiative (ACE).
A number of competition marketing events are scheduled for the month of May. Companies wishing to apply, should do so by visit REACT Household Solar Programme. For inquiries contact us on firstname.lastname@example.org