M-KOPA Solar has announced the second USD 4 million Note, from an expected USD 20 million total size, under an impact debt issuance programme established in partnership with a leading Liechtenstein banking group.
The funding will help finance M-KOPA’s growing working capital needs as it moves from serving 330,000 customers today, to its target of over 1 million by the end of 2017. This is a landmark programme for debt funding in the off-grid power sector.
According to Chad Larson, Co-Founder and Chief Credit Officer, M-KOPA, “By allowing an ongoing source of funding for our working capital assets, including our receivables book, this programme will allow M-KOPA to scale its business more easily, and in more a predictable trajectory, as we reach our goal of a million customers by 2017. We couldn’t be more pleased to be working with our banking partner and city law firm Kerman & Co.”
M-KOPA makes solar energy affordable to low-income households on a pay-as-you-go instalment plan. Customers pay a deposit of US$35, followed by 365 daily mobile money payments of 50 cents. Each battery-powered 8W system comes with 3 lights, mobile phone charging and a solar powered radio. Customers can now also opt for a 20W system with digital TV.
After completing the payment package, customers own their system outright – generating free, clean power and savings of over US$750 per household over a four-year period. They then qualify for more cost effective financing for a range of productive assets. These include more lights, digital TVs, energy-efficient cooking stoves, internet-enabled smartphones, and water storage tanks.
After the successful sale of a USD 3 million inaugural Note issue in October last year, M-KOPA placed another oversubscribed USD 4 million Note on 11 April 2016. The Notes were issued out of a compartmentalised Luxembourg securitisation vehicle to sophisticated and institutional investors only. The proceeds of the Notes will be on-lent to the M-KOPA group for working capital purposes at the M-KOPA operating companies in Kenya, Uganda and Tanzania. The ultimate source of interest and repayment for the Notes is the collection of the small instalments from customer payment plans on their solar devices.
The minimum purchase size was USD 150,000.
Robert Koller, Partner Kerman & Co said, “The Impact Debt Issuance Programme we created for our clients is part of our focus on social impact and helping the sector to scale up. We have made use of traditional structures and procedures adapting them to this unique platform. The time to market to get funding for social impact businesses that use this platform has been reduced from many months, to just a few weeks.”
Using such financing techniques M-KOPA not only helps to create a financing platform for impact businesses, but also provides proof of concept that the impact investment area is scalable in a way that will allow the sector to grow even further. These Notes open the way for institutional investors and high net worth individuals outside the philanthropy sector.
The currently issued USD 4 million will support the distribution of approximately 80,000 additional solar home systems over the next 18 months. With an average household size of over 5 people, over 400,000 lives will be improved. And those 80,000 homes will be generating 10 million hours of kerosene-free lighting per month and combined projected savings of USD 60 million over a 4 year period.