A new flagship report from Crowd Power, part of the TEA platform, highlights how the Covid-19 pandemic has resulted in a 25% drop in energy access-related crowdfunding volumes.
The report explores the key trends in the energy access-related crowdfunding sector between 2020 and 2021, highlighting how energy access-related crowdfunding volumes decreased by 25% to $48m in 2020 after five consecutive years of 100% growth (average year-on year).
This fall in volumes was precipitated by reduced lending on debt platforms servicing larger companies which typically account for most crowdfunding activity. During the pandemic, larger ticket lenders either paused or reduced new lending to companies, as they experienced a substantial drop in investments from retail crowd investors. Simultaneously, the lenders experienced a fall in demand for debt financing from larger energy access companies who had revised their growth expectations downwards.
In contrast, the report finds that smaller ticket lenders increased their activity in 2020, with the US platform Kiva ramping up its lending activity and developing bespoke loan products to support its social enterprise and financial institution partners during the pandemic.
For some equity crowdfunding platforms, reduced investment capital in the start-up ecosystem presented an opportunity, with platforms such as Crowdcube reporting record volumes in 2020. As a result, equity crowdfunding volumes unexpectedly increased by more than tenfold in 2020, raising close to $6 million, accounting for 12% of total energy-access related crowdfunding volumes.
Donation and reward crowdfunding continued to decrease and accounted for only 0.3% of the total crowdfunding volumes raised by platforms in 2020.
Looking ahead, the report indicates how concessional capital from donors has the potential to support recovery and growth in the energy sector – through deploying co-funding for campaigns, improving investment and loan products, and strengthening pipeline development of crowdfunding platforms. The report includes recommendations for funders looking to support energy access-related debt crowdfunding.
Funded by UK aid, through the Transforming Energy Access platform and implemented by Energy 4 Impact, Crowd Power examines alternative finance for energy access markets, with a particular focus on crowdfunding.
To read more about crowdfunding click here.