Nico Tyabji, Director of Strategic Partnerships, SunFunder
Location: US, East Africa
« As a financial intermediary for the off-grid solar sector, we’ve grown alongside companies »
Since it launched as a specialist debt financier for the off-grid solar sector in 2012, SunFunder has improved energy access for 2.9 million people. Co-founders Ryan Levinson and Audrey Desiderato lead the teams of 23 staff members from the US and East Africa respectively. « The economics for solar were improving rapidly, and Ryan wondered why this wasn’t taking off in the developing world, » explains Nico Tyabji, director of strategic partnerships. Some of the early pioneers of the solar industry at the time were working in rural areas, and mostly in East Africa; Greenlight Planet, Off Grid Electric (M-Power), or d:light. While the technology and distribution models were there, or developing, the financing was not. « The biggest bottleneck was the lack of scaleable debt financing, » says Tyabji.
And so, five years ago, Levinson and Desiderato began a crowdfunding campaign. Tyabji calls it a « great way to get started ». Capital was deployed, demand was high; more scale was needed. The business model changed « almost immediately ». SunFunder switched to selling private debt notes, now larger structured funds, and has developed more specific financing solutions along the way. Its investors primarily come from the US, and increasingly from Europe. The investors also have their own diligence, and SunFunder has a 100% repayment record.
A typical customer that the financial intermediary might provide debt to is part of a « second generation » of energy entrepreneurs. « It’s the state of the industry as a whole, » says Tyabji, about the promising startups who can’t get loans because of their lack of a track record. « Solar is a hard sell in the local economy. » The credit and lending teams in East Africa play a unique role in finding new opportunities and undertaking diligence on new companies. They also help to develop early-stage business in a more hands-on way.
Another example of a customer is the Uganda-based Solar Now. The solar home system provider designs its own products and has rolled out a two-year payment plan for customers in rural areas. SunFunder provided a small loan initially for then, and is now working on “larger facilities and innovative structures » for the company. explains Nico Tyabji, who previously worked at Bloomberg Energy Finance, where he led coverage of off-grid and energy access.
Whilst SunFunder still works on small loans with locally-owned businesses, from a competition viewpoint, Tyabji says it would like to do scaleable, larger deals too. He points out that more and more investors are taking an active role in this in the sector, particularly from an equity standpoint. While SunFunder works on residential solar projects, since it is a retail product which is financed and sold, it is starting to do more solar financing for businesses. In general, the off-grid element – which would mean essentially operating as a mini-utility – is harder. « We don’t have companies who have found the winning models for mini-grids, or village tariff plans, » he explains.
There are a couple of big changes that Tyabji has noticed at SunFunder. The leap in financing has gone from five-figure sums to seven-figures. The process has also become more sophisticated. A simple loan to a solar company became financing through special-purpose vehicles – Tyabji quotes the pay-as-you-go consumer finance offering as an example. « The company has to find the upfront cost of that system somewhere. We now set up separate financing vehicles for those systems. » The advantages of this include simplified portfolios for the companies, and allowing other investors to come in, amongst others. « We’ve been growing alongside the sector, » Tyabji says. « We’re ready to take off. »
Nabeelah Shabbir @lahnabee