But
within two years his company EcoZoom, which sells solar lights, radios, MP3
players and other equipment to some of Kenya´s poorest residents, ran into
financial difficulties.
The
banks were not willing to lend him the capital he needed to stay afloat and
loans available from microfinance institutions were too small.
So,
like a number of new technology companies seeking to scale up their programmes
in Africa, he turned to a crowd funding company.
"Few
banks if any could finance a social investment project dealing with people seen
as high risk group, and even worse banks are expensive and give conditions that
are not easy to meet," he told the Thomson Reuters Foundation, referring
to high interest rates charged by banks.
TRINE,
a Swedish company which raised funds for EcoZoom, has a community of about
1,000 young investors in northern Europe willing to each give a minimum of €25
(US$27.14) to solar firms which aim to help the world´s poorest.
Using
crowd funding, it has raised more than €750,000 (US$814,200) for 10 renewable
energy projects since its launch last year, said Matthew McShane, TRINE´s
regional manager in East Africa. The firm has invested in countries including
Kenya, Zambia, Uganda, Tanzania and Senegal.
In
Kenya, EcoZoom received €170,000 in February, while €160,000 went to Azuri East
Africa, part of Azuri Technologies. Two solar micro-grids have also received
funds.
"The
majority of (our) investors can invest in many other ventures in Europe but
choose to put their money in social impact projects partly because they want to
touch the lives of the poor and partly because returns are slightly higher when
compared to ... normal investments," McShane said.
The
returns are about 6 percent, because of the perceived higher risk associated
with this market, he said.
GROWING
TREND
Globally,
crowd funding provided US$2.1 billion in investment in 2015, and investments in
developing countries alone are predicted to exceed US$96 billion a year within
a decade, according to the World Bank.
It
is emerging as an increasingly important means of financing new technology at
scale in rural Africa, said Azuri Technologies CEO, Simon Bransfield-Garth.
Unlike
microfinance institutions where large investors make many small loans to firms,
crowd funding allows many small lenders to provide substantial finance to
organisations with the reach and scale to deliver significant impact, he said.
"Crowd
funding is clearly no longer just for start-ups and has the potential to
provide a new class of capital for energy access," Bransfield-Garth said.
Azuri
East Africa turned to crowd funding when it wanted to raise cash to help its
Kenyan partner, Raj Ushanga House, sell solar panels to 1,200 homes, helping
6,000 people access electricity.
Crowd
funding is one of the most progressive and innovative ways of raising money for
projects, and relatively unexploited in Africa, said George Wachiuri, a leading
Kenyan investment advisor and head of Optiven Ltd, a company based in Nairobi.
"It
is a trend we should see grow in Africa in the future, especially when projects
impacting the poor are involved," said Wachiuri.
Crowd
funding needs to be carried out by specialized firms that are well versed with
the concept, he added. "One needs a good understanding of how this type of
fundraising works to be able to execute it successfully."
TRINE
conducts due diligence on a company seeking investment, assessing its business
model, supply chain, profit margins and ability to repay, before starting to
raise funds.
In
East Africa, where it has helped fundraise most, the firm is attracted by
relatively high awareness about solar energy with "mature markets",
and the availability of mobile money platforms - such as apps - that mean
consumers can easily make payments using their mobile phones, McShane said.
"So far ... things have gone smoothly. Those we have given money to are making their repayments on time and so far we cannot say there is risk in funding these investments," said McShane. (US$1 = €0.9211)
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