However, growth is limited. The solar revolution is not for all. Many of these companies do not reach the rural, last-mile areas due to the perceived cost and most are selling more expensive products.
But, there is hope.
SolarAid was announced as one of the three winners of the Global Distributors Collective’s (GDC) Innovation Challenge in Kampala today.
The GDC is housed by Practical Action and funded by the UK’s Department for International Development. It is a group of over 120 last-mile distributors, including our social enterprise SunnyMoney, looking to reach those others do not and many voted for SolarAid’s idea.
Last-mile distributors often face the same challenges. Within off-grid energy, there has been the recent trend of funding being moved away from last-mile distributors towards companies that sell larger, more expensive products like solar home systems. Therefore, by working together under the GDC banner, we can test and share innovations with each other to reach rural, lower-income families.
SolarAid’s idea is to create the first ever energy cooperative in Malawi – FEBCO. FEBCO stands for Financing Energy Business Cooperative. The innovation has been designed by Super Agents, for Super Agents.
Super Agents are the lead entrepreneurs we work with in Malawi. They operate their own solar light businesses within separate territories and have their own networks of entrepreneurs working for them.
Access to finance is a key barrier to the growth of the Super Agents’ businesses. The traditional banking system, and even Microfinance Institutions are just not set up to serve business people like our agents. Interest rates are high, they move slow and their geographical reach is limited.
Therefore, we will be launching FEBCO. It will be a registered SACCO (Savings and Credit Cooperative) run by the agents. They will invest 40% of the capital into the fund and they will be able to access finance to boost their businesses (predominantly with purchasing stock) at half the national rate of interest (20% vs 40% per annum).
As Super Agent, Chisambazi Nyirenda II says, ‘FEBCO shall be critical as a vehicle for empowering growth and expansion of solar / renewable energy entrepreneurs and enterprises by enabling timely access to lower cost of financing and as a conduit for business training, monitoring and evaluation to ensure that they do, indeed, grow and prospect.
Brave Mhonie, SunnyMoney Malawi’s General Manager, explains the model in the following video:
By winning the innovation challenge, we can now begin a pilot of the FEBCO model, capture what we learn and share with our GDC colleagues to spread a potential transformational model in rural business people accessing finance – on their terms.
We will soon have exciting news to share on how you can support the entrepreneurs and their businesses. Watch this space!
Jamie McCloskey, Director of Development