Crowd Power, part of the TEA platform, has released its fourth state-of-the-market report examining the challenges faced by crowdfunding platforms in the energy access sector.
Crowdfunding can be a powerful tool to resolve well-known market gaps, such as the lack of financing for earlier-stage companies. In 2021, energy access projects raised $61.5 million on crowdfunding platforms marking a record high and an increase in volumes above pre-Covid levels. Crowdfunding also has inherent benefits for companies in the scale-up phase as the speed and flexibility of this innovative financing is enabling early-stage companies to take advantage of sustainable and profitable investment alternatives.
Though the energy access crowdfunding market is on the rise, more support is needed for smaller ticket size, local currency, and ‘frontier’ investments which are often perceived as riskier. The report demonstrates how locally owned, early-stage companies in the energy access sector struggle to access finance through local financial institutions, due to prohibitive collateral requirements but are often too large for microfinance institutions.
Spotlighted within the report, an interview with Charm Impact, Co-Founder Gavriel Landau, further demonstrates the challenges faced by debt crowdfunding platforms. He says, ‘There is no willingness to adjust minimum ticket sizes, because most crowdfunding and institutional funders are fundamentally not structured to do it.’
The report draws upon various crowdfunding platforms’ experiences including Trine, Energise Africa, Lendahand, Bettervest, Kiva, frankly.green and Crowd4Climate and further emphasises the three main common challenges faced by crowdfunding platforms.
- Lack of pipeline
- Lack of investors
- Operating costs
It then explores solutions and how donor initiatives, such as Crowd Power, can support platforms to reach smaller companies by covering the costs of origination and due diligence. The current phase of the Crowd Power programme will run until 2025 and seeks to address the challenges faced by these crowdfunding platforms.
Access the full report here: Crowdfunding Energy Access – State of the Market Report 2021-22 | Energy 4 Impact