Exploring Energy SME Financing in Developing and Emerging Countries

1. Exploring Energy SME Financing in Developing and Emerging Countries Funded by A study realized by

2. Agenda • Introduction by Sustainable Business Institute • Report exploring energy SME financing • Introduction of discussion participants • Panel discussion • Access to finance: appraisal of the current situation • Recent developments • Characterization of the financing gap • Innovations for closing the gap • Bridging the gap from a public perspective

3. Agenda • Introduction by Sustainable Business Institute • Report exploring Energy SME financing • Introduction of discussion participants • Panel discussion

4. Questions at the outset Initial questions 1. What are barriers for market development of Solar Home Systems? 2. What role do financial services of local companies play and how can they be implemented and refinanced? 3. How can public authorities facilitate market development effectively and efficiently?

5. Questions at the outset Initial questions 1. What are barriers for market development of Solar Home Systems? 2. What role do financial services of local companies play and how can they be implemented and refinanced? 3. How can public authorities facilitate market development effectively and efficiently? Research questions for this study 1. What is specific about energy SMEs, especially in terms of the challenges they face? 2. Can the existence of a financing gap for energy SMEs be confirmed? 3. If so, what are the reasons for this gap and how can the gap be bridged?

6. The financing gap Microfinance Institutions Traditional banks • High “Even after the businesses had already grown into 500k+ USD sales per year, they still did not get financing from local banks ... despite the foreign funds put into local banks." – funder • Asset backing Financing gap for SMEs Private Equity / Venture Capital • Low ca. $5k - $20k ca. $200k - $2mn • Low • High • Size of financing

7. Challenges along the value chain Integrated distributor, service provider and MFI Integrated distributor and service provider End User Manufacturer National distributor Local distributor Microfinance Institution

8. Challenges along the value chain Integrated distributor, service provider and MFI Integrated distributor and service provider End User Manufacturer National distributor Local distributor Microfinance Institution High upfront costs to build up distribution and service infrastructure

9. Challenges along the value chain Integrated distributor, service provider and MFI Integrated distributor and service provider End User Manufacturer National distributor Local distributor Microfinance Institution High upfront costs to build up distribution and service infrastructure Need to provide consumer financing

10. Challenges along the value chain Integrated distributor, service provider and MFI Integrated distributor and service provider End User Manufacturer National distributor Local distributor Microfinance Institution Internationally-sourced components High upfront costs to build up distribution and service infrastructure Need to provide consumer financing

11. Challenges along the value chain Integrated distributor, service provider and MFI Integrated distributor and service provider End User Manufacturer National distributor Local distributor Microfinance Institution Internationally-sourced components High upfront costs to build up distribution and service infrastructure Need to provide consumer financing Lack of funder understanding of energy SMEs and their products

12. Challenges from the funders' perspective “There’s lots of money but no deal flow. A major challenge is identifying investments, identifying strong entrepreneurs and building them up to be confident to engage in the business.” Scoping and due diligence • Identifying strong entrepreneurs • Obtaining solid data on business cases Enterprise development • Cost of technical assistance / enterprise development services • Lack of local data for enterprise development “The main challenge of [name omitted] working with energy SMEs lay in the fact that the SMEs did not provide [us] with primary data.” ”Technical assistance was the problem - there was too much face time, i.e. time spent face-to-face with our customers and their customers.”

13. Thank you

14. Agenda • Introduction by Sustainable Business Institute • Report exploring energy SME financing • Introduction of discussion participants • Panel discussion

15. Agenda • Introduction by Sustainable Business Institute • Report exploring energy SME financing • Introduction of discussion participants • Panel discussion • Access to finance: appraisal of the current situation • Recent developments • Characterization of the financing gap • Innovations for closing the gap • Bridging the gap from a public perspective