Social Investment Managers and Advisors (SIMA) has launched the Energy Access Relief Fund (EARF) with a first close of $68 million and a target closing of around $84 million by the end of the year.
The fund aims to support off-grid solar companies and protect energy access for over 20 million people in sub-Saharan Africa and Asia. Through this fund, SIMA will provide relief loans to institutions facing liquidity constraints due to COVID-19 disruptions.
SIMA said energy access companies face the threat of decreasing business viability even after 19 months since the onset of Covid-19. Lockdowns due to COVID-19 and the resulting economic hardship affected the consumer base of these companies. In addition, supply chain disruptions and increasing commodity prices make the supply of solar components hard for the companies.
The fund is expected to provide subordinated capital with a subsidized interest rate of up to 5% for medium tenure and no collateral to around 100 energy access companies that had a viable business model before Covid-19. In addition, the support may increase to a total of 110-120 companies by the first quarter of 2022, with a target closing of $84 million.
Arivazhagan GD, Vice President of SIMA, said, “As per our estimation, about 77% of the small and medium-sized companies that are applied to the EARF are facing a liquidity crisis, and with a limited access to capital, these companies are struggling to fund local jobs and operating expenses for their business continuity.”
Investors like CDC, FMO, DFC, Green Climate Fund, Acumen, Shell Foundation, The Rockefeller Foundation, IKEA Foundation, United States Agency International Deployment, UK Aid, International Finance Corporation, World Bank, and SIDA leveraged their resources in closing the fund.
The Energy Access Relief Fund will provide subordinated capital with a subsidized interest rate of up to 5%, medium tenure (up to 3.5 years), and no collateral to about 90-100 energy access companies that have had a viable business model prior to the onset of COVID-19.
According to SIMA, it has been providing relief loans since January 2021 through the ‘Prime the Pump’ platform, covering nine relief loans in seven countries before the fund close.
Last month, the Development Bank of Southern Africa invited bids to support solar and wind generation projects under the embedded generation investment program (EGIP). The selection will be conducted through a competitive bidding process.