DFIC supports the development of crowdfunding for renewable energies in Benin

Client

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

Background

Renewable energies are an excellent strategy for electrification in Africa and Benin. However, the initial investment is significant and presents a challenge, often a difficult obstacle to overcome. Solar companies in a country like Benin are predominantly SMEs that have difficulty financing the storage of their equipment. They often cannot convince traditional banks to grant them a loan. In addition, the market could grow faster if solar companies could offer their customers financing for their solar photovoltaic (PV) systems or projects. Crowdfunding is an interesting alternative when it comes to the question of how local solar companies can be financed. DFIC was keen to investigate this.

Objective

The EnDev programme for Benin has recognised the challenge of financing for companies as well as the opportunities of crowdfunding. The DFIC study and consultancy programme aims to develop strategies and implementation paths for the introduction of crowdfunding. The aim is to propose specific measures to support companies in strengthening their financial capacity in the area of crowdfunding (participatory financing).

Results

In this context, the crowdfunding option was analysed and its potential for the solar sector in Benin assessed. An action plan was also developed to support the use of crowdfunding by partner companies of the EnDev programme.

EnDev should continue to develop its strategy for Benin and in the area of SME development. Several structural developments in the market could be taken into account and supported by EnDev:

• Corporate and entrepreneurial development (training, coaching)
• Structural co-operations, cooperatives, mergers, entry of partners to increase capital
• Creation of projects of significant size (mini-grids, significant scale of solar kits (RBF), productive utilisation market e.g. 100 KWp)
• Crowdfunding of microfinance institutions (MFIs) for the granting of small loans, which are granted to the MFIs by the crowd.

EnDev funding should be used to develop training and education programmes on crowdfunding and at the same time strengthen the capacity of local entrepreneurs to expand their business and thus the solar market. Platforms should be encouraged to engage in training programmes. This engagement could take an indirect form by contributing to the development of curricula or examples (models).

Training for entrepreneurs as well as coaching and support/advice form the basis of an activity aimed at developing projects to be financed by the platforms. This support is intended to develop SME projects that correspond to the interests of the platforms.

Many SMEs are too small to have access to most platforms. They could obtain their financing through an MFI. These MFIs can be financed like companies, depending on their strength and performance. To enable these MFIs to raise larger sums, they should be supported by adequate coaching.

Success factors in crowdfunding are, on the one hand, the marketing power of the platforms and, on the other, the quality of the proposed companies and projects.

The development of the crowdfunding market plays a very important role for EnDev. SMEs need to be prepared, trained and supported. In this context, the development of some champions should be taken into account.

Subsidies via the RBF system can be replaced by co-financing platforms. The most interesting option would be the financing of contracts and the establishment of a special fund. Such a fund can be designed for co-financing and/or guarantees. EnDev could provide co-financing as a matching fund. In this case, EnDev would pay one euro for every euro invested by private crowd investors.