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Friday, 9 May 2014

Off - Grid Lighting Companies Awarded Grants to Benefit Kenya's Poor

Eight off-grid lighting (OGL) distributors have been awarded grants in an effort to increase access to reliable and affordable OGL solutions for the Bottom of the Pyramid.

The grant winners of a competition seeking to deliver financial support to eligible distributors of modern off-grid lighting products in Kenya were announced last month. The eight selected companies are: Hensolex, One Degree Solar, Renewable Energy Ventures, Smart Solar Kenya, Solataa Ltd, Sollatek electronics Ltd, SunnyMoney Kenya and Mibawa Suppliers. 

Launched in June last year, the grant competition is Funded by the Russian Federation through the World Bank, and operated under the ESME Trust Fund. The initiative aims to support Energy SME Development in sub-Saharan Africa to foster local private entrepreneurship and invest in the provision of energy services in remote, un-served or under-served regions. This initiative forms part of GVEP’s support to Energy SME to accelerate the development of commercial OGL markets in Kenya.

Ms Mills added that the OGL grants fill this gap by providing working capital to distributors, who in turn sell products through low-interest credit to clients, whilst still being able to replenish stock.
“Clients immediately benefit from cheaper, cleaner light sources whereas the distributor is assured of short- and medium term cash flow”, Ms Mills explains.

The OGL products mainly use solar energy as a source of lighting and for mobile phone charging, reducing overreliance on electricity and kerosene lamps.

According to Lighting Africa, a joint World Bank/IFC Project, there is a real need for high quality lighting products to be more readily available in the African market.  Annual sales of OGL have grown by 90% to 95% since 2009. The sales are expected to rise due to many phone users and limited connection to electricity. 

Improved quality of available off-grid products and the development of easy payment options such as pay-as-you-go models, are contributing to their increased popularity.
However, off-grid lighting and other clean, renewable energy initiatives, though promising, are threatened by inadequate funding and investment options. Banks’ limited knowledge on the industry’s prospects and perceived high risks coupled with weak balance sheets and credit history among the SMEs, are a stumbling block to fast uptake of the technology. Manufacturers are also grappling with how to increase production to match demand, while importers tie up considerable funds due to bureaucracies in the manufacturing process. 

Against this backdrop, pre-qualified OGL product distributors were called to submit proposals for grants. The proposals were required to have targets for product sales; a viable business plan including sustainability after the grant is completed; key measurable milestones; an environmental sustainability plan; a detailed budget, and procurement plan. GVEP provided business advisory services to the applicants in order to improve the quality of the proposals.
An Independent Evaluation Committee (EC) consisting of eminent professionals drawn from diverse fields with a bias towards renewable energy, rural business and finance provided an objective assessment of the proposals. The committee included the Government of Kenya (represented through the Ministry of Energy & Petroleum and the Rural Electrification Authority), Kenya Renewable Energy Association (KEREA), Consumer Information Network (CIN), Research Institutions and others.

Now that GVEP has completed signing the contacts with the grant recipients it will be responsible for the implementation of the programme.

 "Communities that will benefit most from clean, sustainable energy solutions are those with least access to these products, having to pay high up-front capital costs,” Says Belinda Mills, ESME Programme Manager.
“By achieving business scale and commercial viability, we are confident that this programme will succeed in bringing about strong developmental impact and the reduction of dirty lighting at the Bottom of the Pyramid.” Says Dr. Caesar Mwangi, GVEP Regional Director Africa.

Posted by Deborah Mupusi