The EEP Africa Catalyst window participates in a loan syndicate to accelerate SunCulture’s pay-as-you-grow business model in Sub-Saharan Africa
SunCulture, a solar irrigation company headquartered in Nairobi, Kenya, today received the first disbursement from a new USD 11 million syndicated debt facility to expand its operations in Sub-Saharan Africa. This loan is the second loan extended to a graduate of the EEP Trust Fund managed by the Nordic Development Fund (NDF).
Karin Isaksson, Managing Director of NDF, says that the loan is a clear demonstration that NDF is able to deliver on the new NDF Strategy and its commitment to provide flexible financing and catalytic impact. She noted,
It has all the ingredients that define NDF’s added value in the climate financing landscape. It demonstrates our capability to convene and mobilise additional financing. It also highlights our unique mix of financing instruments and our capacity to blend and match solutions to support our partners, public or private.
NDF launched the EEP Catalyst window in 2019 as a pilot to provide follow-on debt financing to successful companies from the EEP Innovation grant portfolio. EEP Catalyst is an evolution of the EEP Africa platform that builds on a decade of grant-making and a portfolio of over 250 early-stage clean energy companies to enable scale up of commercially viable clean energy solutions.
The new loan is ground-breaking for the productive use of solar sector due to its size and its innovative combination of working capital and end-user financing. It will enable SunCulture to scale up renewable energy installations at smallholder farms and households that will mitigate over 20,000 tons of CO2 annually – as farmers replace diesel pumps with solar ones – whilst facilitating income growth and job opportunities in rural communities.
SunCulture has pioneered a “pay-as-you-grow” business model to make solar-powered irrigation affordable for smallholder farmers in Sub-Saharan Africa, combining end-user finance, value-added services, modern climate technology and access to improve productivity. Research by SunCulture in Kenya found that by adopting solar irrigation, farmers can increase their revenues by over 400%.
Samir Ibrahim, CEO of SunCulture said,
The past year was devastating for the millions of smallholder farmers in Kenya; 87% are in a worse financial position due to the pandemic. 81% of SunCulture farmers, however, were able to increase their revenue from farming in 2020. Solar irrigation helps create food security and sovereignty, and it also helps lift people out of poverty. This facility further enables our efforts to support farmers by providing them with more of our solar solutions, and faster.
“We are proud to be standing with our partners and supporting the emergence of a greener economy, precisely at this time of COVID-19,” added Isaksson.
Jemimah Kwakye-Fosu, Investment Officer, who led the transaction for SunFunder, said: “We are delighted to have led this syndicate of proactive lenders who worked well together for a common goal: to help SunCulture reach many more farmers. It shows how working capital can be combined with end-user financing, which is essential for making productive use technologies affordable.”
Surabhi Mathur Visser, Head of Investments at SunFunder, added,
This is a pioneering transaction that demonstrates how productive use technologies like solar irrigation can be scaled up. SunFunder arranged this facility with a similar-minded group of lenders to support an innovative product and business model. We look forward to seeing SunCulture grow in Kenya and new markets.
EEP Catalyst is designed to finance the scaling up of the next generation of clean energy market leaders in Africa. Flexible early-stage debt is still scarce in the sector and expansion stage loans are needed to support innovation and unlock commercial capital. EEP Catalyst closed its first loan to REDAVIA in 2019.
Arranged by SunFunder, the co-investors in the facility are NDF; Triodos Investment Management, through its Hivos-Triodos Fund; SunFunder through its Solar Energy Transformation Fund; AlphaMundi through both its SocialAlpha and AlphaJiri Investment Funds; and the AfDB’s FEI OGEF managed by Lion’s Head.
Read the press release: SunCulture secures $11m from SunFunder syndicate to expand solar irrigation in Africa