Bringing off-grid power to rural fishers and farmers
In East Africa, where agriculture is a main contributor to the economy’s GDP, climate change-induced drought and unpredictable weather patterns have contributed to increasing uncertainty for rural business owners and their communities. Tanzania-based social business Simusolar hopes to enable rural prosperity and overcome last-mile distribution barriers by providing and financing solar equipment for productive use.
Based on a lease-to-own model and a wireless ‘Internet of Things’ PAYGo-platform, Simusolar sells affordable solar-powered lights for fishing and irrigation systems for smallholder farming. The PAYGo platform allows the company to monitor customer equipment remotely, while enabling customers to ‘pay as they earn’ based on their seasonally varying cashflows. This model helps rural business owners reduce operating costs, generate a reliable income and enhance efficiency and productivity over time, thereby supporting a progressive transition from subsistence farming to agribusiness.
To effectively reach rural populations with productive equipment, obtaining financing for working capital, inventory and client payment plans was a critical step for Simusolar. Securing long-term funding partners that would make the business bankable and enable a scale up of operations proved to be a particular challenge. The novelty of the productive use solution and the inimical regulatory environment added additional layers of complexity to the process of getting the business investment-ready.
In early 2018, the GET.invest Finance Catalyst came on board and started supporting Simusolar with inputs to their business plan, project documentation, finance strategy and financial structuring. Due to the small ticket size and the company’s early growth stage, initial outreach efforts to impact debt providers did not mature. With an advisor’s support, Simusolar worked on fine-tuning a fundraising strategy to raise convertible debt, more in line with the company’s stage and capacity for growth. This ultimately allowed the business, accompanied by the Finance Catalyst facility, to successfully advance its dialogue with private impact investors and enter into discussions with specialised funding instruments such as Gaia Impact Fund and ElectriFI.
With the support of the GET.invest Finance Catalyst team, Simusolar has so far raised over €2m funding from Acumen Fund, Chroma and Impact Capital. Within two years, the company has been able to hire over 100 employees, triple revenues and reach over 12,000 smallholder farmers and fishermen, allowing almost 100% of clients to increase their income and cut fuel expenditure by an average of 46%.
In January 2021, Simusolar completed its funding round with a €1.5m investment from ElectriFI, enabling the company to further expand its activities in Tanzania and Uganda, and possibly enter a third African market.
Making use of the company’s extensive know-how on the application of PAYGo models in agriculture, Simusolar is now looking to put the model to scale and expand the offer to eventually include cold chain equipment, electric mills and other productive use systems. This will help connect even more rural business owners to reliable, clean power and increase local employment opportunities, economic security and resilience to climate change impacts.
Disclaimer: Support to the company is ongoing as of 06-2021. Projected results are subject to change.