A defining characteristic of human history and nature, conflict – whether armed or otherwise – continues to destroy human lives, rupture societies and uproot families and entire communities, setting them off on an arduous search for safety and new places to call home, not to mentions signs of altruism and human compassion. Anti-immigrant political rhetoric and sentiment in the U.S. and Europe has been on the rise in response, raising the foreboding specter of fascist-style government.
Poverty and climate change are fundamental factors contributing to the rising tide of forced migration, both directly and indirectly. Lack of access to affordable, reliable, environmentally sustainable sources of high-quality energy perpetuates the cycle of poverty from generation to generation. Concomitantly, fossil fuel greenhouse gas (GHG) emissions and environmental degradation are destroying local ecosystems and the life-supporting services they provide, reducing the capacity of those most vulnerable to break free from that cycle.
Marking a world first for development finance, Developing World Markets (DWM) has managed to bridge the worlds of international investing and “grass roots” socioeconomic development with the origination, placement and investment of the proceeds of a four-year, $60.8 million ORCA (Off-Grid Renewable (Energy) Climate Action) note. Investing the proceeds in 11 select off-grid solar energy value chain participants active in Africa, Asia and Latin America, DWM’s pioneering debt securities issuance will help developing world communities and countries “leapfrog” a generation of power generation and distribution and help lay the foundation for forging more open, equitable and environmentally sustainable economies and societies.
Recognizing, and Forging, a Key Linkage
Backed and spurred on by pioneering multilateral sustainable energy development programs, such as USAID-led Power Africa, and social enterprise-minded investment groups, a small crop of ambitious, innovative off-grid home and community solar energy start-ups is setting the stage for communities and countries across the developing world to “leapfrog” construction of centralized power generation and national grids by going straight to deployment of local renewable power generation, storage and distribution. That, in turn, is alleviating poverty and providing the technological and socioeconomic “tools” and resources needed to create sustainable economies and societies and, in turn, stem the rising refugee tide.
Like illnesses, events and conditions that wind up causing conflicts and forced migrations can be acute – sudden and severe – or chronic, brewing subsurface before breaking out in fully blown form. And like a pebble dropped in a still pond, waves of refugees ripple out from centers of conflict, in turn adding to social, economic and political pressures in places along their migratory routes.
In contrast to selling arms, erecting walls and otherwise strengthening barriers to immigration, providing the assistance citizens of developing world nations require to eradicate poverty and forge equitable, sustainable societies addresses the problem at its root. By reaching out and giving developing nation citizens and communities the means to build out local, emissions-free energy infrastructure for themselves, off-grid home and community solar program partners are enabling them to grasp hold and play a larger role in building a healthier, more vital and sustainable future.
That’s the key linkage that was all too often missing in decades worth of international aid and development funding aimed at expanding energy access and alleviating poverty, via which billions of dollars have been doled out to multinational corporations and national governments to carry out mega-sized coal and other fossil fuel-based power plant and long-distance transmissions grid projects.
In stark contrast, the degree and extent local Africans are embracing this comparatively “low tech,” but more appropriate, socioeconomically equitable and environmentally friendly approach to expanding energy access may be off-grid solar’s most distinguishing, and beneficial, attribute.
Developing World Markets and the ORCA Note
DWM is allocating the capital raised via the ORCA note issue among “eight financial institutions, effectively banks, who lend to companies in this space, and three pure off-grid home/community solar energy providers – companies offering mobile pay-go home solar energy systems to low-income residents – the panels, typically lithium-ion battery packs, and a range of household DC appliances, LED lighting, fans, and mobile phone chargers among them,” DWM managing director Peter Johnson explained in an interview for Solar Magazine.
d.light, Kingo and Off-Grid Energy are the three off-grid household/community solar energy providers. Kingo is Guatemala’s leading off-grid solar energy company. d.light and Off-Grid Energy are key players in East and Sub-Saharan Africa’s fledgling, fast growing off-grid home solar energy markets. With dual headquarters in the U.S. and India, d.light is also expanding in South and Southeast Asia.
As Johnson explained, DWM’s involvement in structuring innovative debt securities. raising capital from leading international investment groups and providing those funds directly to companies working on the ground in low-income communities “comes directly from our years of doing the same thing for the inclusive finance, call it the microfinance space broadly.”
“Since 1999, we’ve been involved in financing financial institutions who serve the base of the pyramid. We’ve become experts in what you might call repayment flow – micro-obligations by individuals in the developing world.”
“The off-grid solar space may sound like it’s all about energy and photovoltaic cells, but it doesn’t work without the financing side, and that’s our expertise, and that’s how we were able to come in and recognize that this is actually part of our space, and to take the next step of including it in our space.”
The ORCA note, explained Courtland Walker, who leads DWM new product development and partnerships initiatives, “is certainly new – new for DWM and new for the the industry, as well. For the 11 entities that were funded, they had to have activities – and the funds we provided were earmarked for those activities – in that ORCA space.”
Microfinance, Mobile Telecoms and Off-Grid Solar
In addition, investing the ORCA note proceeds in eight developing world microfinance institutions adds to DWM’s extensive track record in the microfinance industry. DWM has provided over $1 billion of similar, special-purpose debt funding to about 170 microfinance institutions in some 50 countries and roughly $1.5 billion when private equity and structured transactions, it’s two other development finance/social impact investment business lines, are included, Johnson added.
“That’s very much our ‘bread and butter,’ but this was the first time that there was this ‘thematic’ angle to the lending, and that’s also what really attracted a lot of investors,” Walker pointed out.
Asked what distinguishes DWM’s activities and the ORCA note from conventional mega-scale models of international development finance, Walker said: “Here I would say you have a highly entrepreneurial model that’s driven by the private sector.”
“While some of these entities have received funding from quasi-government agencies or development agencies, such as the World Bank, KfW…fundamentally it’s private sector business models that have largely been venture capital funded to this point and are now just receiving debt financing from groups such as DWM.”
“They’re able to move very quickly and to directly respond to consumer demand…While it’s early stages and the jury is still out about their ultimate success, they are growing very rapidly. In addition, traditional ‘mega-projects’ may take years to get approval, may have government and private sector tie-in and may have high levels of ‘wastage’ in actually implementing them.”
A More Effective, Unconventional Market-Driven Solution
Added Johnson: “The off-grid solar energy space, and the financing DWM has provided, responds to the unavailability and the unreliability of conventional systems. Estimates vary, but we read 1.3 billion people around the world who are literally off-grid – they’re just not in the neighborhood where the grid reaches. Then there are perhaps another billion who are within reach of the grid, but they haven’t connected to the grid or grid power isn’t reliable.”
“In all these cases, the conventional has failed to achieve the expected goal, so there’s an unconventional solution, which now a combination of innovative technology and financing is providing.”
“We saw not too long ago how the how mobile phones space ‘leapfrogged’ over access to telephone lines, especially in Africa and India, to the point where I would say those land-based phone lines and networks will probably now never be built because there’s no need for them.”
“I think we can presume the same, to some degree, in the electricity supply space. There are going to be communities in Africa, in India and in Cental America that are just too remote, where it’s just too inefficient, or perhaps, where the conventional just doesn’t work, for many reasons, but having access to electricity through renewables is going to be the permanent solution, an off-grid solution.”
Off-Grid Solar, Development Finance and the Rising Refugee Tide
“This is perhaps a more personal view, but I think probably many within Developing World markets would share it, I think whether you are talking about the current attention being devoted to the immigration situation because of Trump, or if you trace it back to what we went through during the Bush era and the ‘War on Terror’ that’s continued to this day, you can take what I would view as some reactive steps, which are sort of after the fact, and say, ‘Let’s build a wall,’ or something of that nature, or you could take proactive steps to think about the root causes of some of the issues.”
“Certainly one root cause is quality of life in those developing countries and we as Developing World Markets look for market-based solutions to help improve quality of life in those developing world countries, and this is one very concrete example of that and more particularly, not only within those developing countries, but amongst low-income populations within those developing countries.”
“If you could improve quality of life in a material area, such as access to clean energy and improve health, it becomes multi-layered…that certainly would be proactive and should make a contribution towards stemming the motivation for them to leave their home countries.”
Summing up, Johnson added: “DWM’s business is built on the premise that improving people’s lives in low-income communities in the developing world, giving them access to finance, energy, health, education, housing is a fundamentally sound business proposition and the benefits are global.”
“If they’re more satisfied in their home communities then there’s less pressure on the global environment, and less pressure related to cross-border issues, such as migration.” comment
*Photos credit: flickr, DWM