Energise Africa Review – Platform Focus on Solar Bonds for Ethical Investors
In this Energise Africa review, we evaluate a crowdlending platform where, starting from £50, UK investors can fund off-grid solar power solutions in sub-Saharan Africa.
- Which problems are being solved by Energise Africa
- Energise Africa in numbers
- How does investing with Energise Africa work
- How does Energise Africa select local solar businesses
- What are the risks and guarantees when investing with Energise Africa
- Social and Environmental Impact
- Conclusion of Energise Africa review
Energise Africa is an online impact investing platform that connects UK investors with off-grid African communities in need of solar power. UK retail investors can invest through debt funding in local solar businesses that sell solar home systems to families in Sub-Saharan Africa. Investments start at £50 and returns are from 5% to 8% per year.
Energise Africa was founded in 2017 and is based in Oxford. The company has several of synergies with Lendahand, the Dutch impact investing platform that we have previously reviewed. In fact, Energise Africa is a joint venture between Lendahand and Ethex, an impact investment platform from the UK. Lendahand is responsible for bringing solar investment opportunities into the Energise Africa platform, which means that you will find similar projects across both platforms.
However, different than Lendahand which support diverse types of local entrepreneurs and small business, Energise Africa focuses only on solar power projects. Those companies also share some of their staff functions, such as the Investments and Growth teams. Koen The, CEO of Lendahand is on the Board of Directors for Energise Africa. Energise Africa is led by Lisa Ashford, which is also the CEO & Director of Ethex. According to LinkedIn, Energise Africa has a small team of 8 people.
Which problems are being solved by Energise Africa
According to the IEA (International Energy Agency), 600 million people are living without access to electricity in sub-Saharan Africa. By proving loans to local solar businesses, Energise Africa is working towards SDG 7 to Ensure access to affordable, reliable, sustainable, and modern energy for all. The main benefits of having access to basic electricity needs are:
- Education: solar power allows students to have a clean source of light after dark, enabling them to have longer hours of study.
- Health: solar-powered lamps improve air quality at homes. Solar energy is replacing kerosene lamps, which emit harmful fumes when burned in indoor environments.
- Quality of life: a reliable source of power allows families to save money with kerosene and reduce the cost of charging mobile phones at charging kiosks.
- Money: small businesses can operate for longer hours by using solar home systems, and consequently, increase their revenues.
Energise Africa in numbers
- Total amount invested: £16.5 million
- Total repaid to investors: £7.7 million
- Minimum investment: £50
- Annual interest rate: 5% – 8%
- CO2 emissions being mitigated: 111,000 tCO2 per year
- People benefited: 505,000
How does investing with Energise Africa work
Investing in Energise Africa is quite simple since there is only one investment type (indirect funding) and one type of business (solar businesses). Investors will be lending money to a local solar business that will then install the solar home systems at local households or small businesses.
Similar to Abundance Investment, UK investors can invest in Energise Africa using the new Innovative Finance ISA. That means that up to the IFISA allowance of GBP 20,000, tax year 2020/2021, investors will not pay taxes.
The main variables for investors to be aware of are the investment duration, which can vary from 24 to 48 months, and interest paid, which goes from 5% to 8% per year.
Once the project is fully funded, the solar businesses will use the money received to purchase solar home systems and then sell them locally. The solar business will receive monthly payments for the solar home system sold. However, investors will receive their respective interests and capital every 6 months. It is expected that the local families and small businesses will own the solar home system after 12 to 24 months.
How does Energise Africa select local solar businesses
Energise Africa uses Lendahand’s support when selecting new solar businesses and projects. Together they run a very thorough due diligence and an in-depth credit risk assessment is performed. As part of the due diligence Lendahand will assess:
- Local partner track record
- Portfolio credit level and capacity of absorbing downturns
- Organizational structure
- Robustness of internal processes
The result of the due diligence is called the “Offer Document” and can be found at each project’s page.
What are the risks and guarantees when investing with Energise Africa
As with many other crowdfunding impact platform, projects are subject to several risks. By investing in unsecured bonds via Energise Africa, investors are exposed to risks related to the conditions of local infrastructure, local business financial status, currency risk, and the financial stability of local families and businesses to cover their monthly fixed costs.
Energise Africa does not disclose its default rate. At their Risk page they mention:
“Money is typically spread across a large number of individuals and businesses and default (non-payment) rates are generally low”
Energise Africa offers unsecured bonds that are not secured by the Financial Services Compensation Scheme (FSCS) nor the Financial Ombudsman Service (FOS). To compensate for that, they offer a few guarantees that might cover only part of the initial capital invested.
- First loss provision: some projects might have a first loss provision. Thus, in the case of bankruptcy of the local solar business, the first loss fund will be used to compensate part of investors’ losses. First loss guarantees will be indicated on each project page.
- Match Funding: other projects have a match funding available provided by UK aid and Virgin Unite. The match funding will be indicated on each project page. Amounts can vary from 25% to 50% of the total investment.
- FX reserve: since Energise Africa is making investments in different countries, it is subject to exchange rates risks. To mitigate that they have a small fund able to offset up to 20% of any currency loss. Energise Africa plans to add 1% of all repayments received from issuers into this reserve fund as the business grows.
Social and Environmental Impact
Energise Africa is clear when estimating the positive impact that each project will bring to the local communities. For example, for the project UpOwa – Issue 6: Cameroon 6.75% Bond, which had an investment target of £350,000 and will allow 1,300 solar home systems to be installed, providing electricity to 1,300 families off-grid, they present the following impact:
stats from GOGLA’s ‘Powering Opportunity: The Economic Impact of Off-Grid Solar’
- 91% of solar light users who previously used kerosene lamps experienced an improvement in their health
- 91% of customers purchasing a solar lantern or home system reported feeling safer since buying or using their product
- 84% of households with children report that they now have more time with which to do their homework
based on Global Off-Grid Lighting Association (GOGLA) impact metrics
- 6,500 people will enjoy clean energy access
- $195 average new household saving on energy-related expenditure over the solar product lifetime
- 1.1 tCO2e to be offset per household over the lifetime of the product
Conclusion of Energise Africa review
After reviewing Energise Africa, we can say that it offers a good solution for UK investors looking to invest in clean energy and to bring positive environmental and social impact to off-grid communities in sub-Saharan Africa.
The platform is straight forward, user-friendly, and has clear information about each project and the solar businesses behind it.
The financial return can be considered average (5%-8%) for this type of investment. However, crowdfunding projects are high risk, since there is no guarantee on the capital invested.
Energise Africa does a good job when disclosing the social and environmental impacts of each project. They disclose project-specific data on emissions avoided and the side-effects of the solutions on the health of the families and the education of the children.
If you are resident in the UK (or few selected EU countries that have reciprocal authorization arrangements) and If you are interested in providing access to solar energy for African communities off-grid, then Energise Africa can be a good investment option for you.
Energise Africa Review
Not an investment advice: The information provided on this website is intended for general information purposes only and does not constitute investment advice, financial advice, trading advice, or any other sort of advice. You should conduct your due diligence and, if necessary, consult a qualified independent financial advisor before making any investment decisions.
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