Power Africa
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Power Africa

BBOXX Changes Everything in Rwanda

Noëlla Uwimana poses in her chicken farm. Credit — BBOXX

Noëlla Uwimana lives in Rwanda’s Muhoza district, where she owns and operates her own chicken farm. To increase production, she said, chickens have to be exposed to constant light. Before buying a BBOXX solar home system, her business relied on unstable grid electricity, which resulted in her chickens having a below-average body weight and increased mortality rate. Now, because Noëlla uses her BBOXX solar system as backup for the grid power, she no longer has to worry so much about the health of her chickens and her increased productivity has helped her to expand her business.

Claudine Banvuganumva with her family. Credit — BBOXX

Claudine Bamvuganumva also lives in Musanze district and is married with two children. Both her children are very young and so she stays home to tend to them and the house while her husband is at work as a professional builder. Before the family bought a BBOXX solar home system, life was difficult. She was afraid to cook at night and waited for her husband to return from work before doing household work. With solar lighting, she can now cook at any time of the day and night, her children can take a shower at night after playing in the field, and the family can eat in a clean and well-lit kitchen. Claudine is also excited because she is now able to save money previously spent on kerosene and candles, which she contributes to a women’s association in her village.

Since 2014, Power Africa partner BBOXX has been helping lift people like Noëlla and Claudine out of poverty with their solar home systems. In total, over 50,000 systems have been installed in Rwanda, currently making BBOXX one of the two largest solar home systems companies in the country.

BBOXX is one of a growing number of companies that supply clean, affordable energy for families that previously had no access to electricity, either because they are far from the electrical grid or they cannot afford a grid connection. The BBOXX off-grid solar home systems cost as little as $7 per month and allow households to have things like higher quality light for children studying at night and reduced exposure to toxic kerosene fumes. It has also eliminated long travel times to access mobile phone charging stations. Appliances such as fans, radios, TVs, and fridges are also available for those that make higher monthly payments and further enables households to climb the energy ladder.

The growth of the solar home system sector in Rwanda has been particularly impressive over the past few years: the number of installations has nearly quadrupled each year over the past two years. According to the Global Off-Grid Lighting Association, Rwanda is the fastest growing market in East Africa and one of the fastest in the world. Despite these advances, significant financing is still needed for companies and continues to be a challenge.

The basic BBOXX unit. Credit — BBOXX.co.uk.

BBOXX and other solar home system companies offer plans for customers to pay small amounts of money on a regular basis because most customers do not have enough money to afford to buy a solar home system outright due to the high upfront cost. The customers are incentivized to make payments because the systems only become operational when fees are paid. While this structure allows households to obtain a solar home system that is otherwise unaffordable, it can take these companies up to two to three years to recoup their capital expenditure. The result is a lack of working capital to restock and meet the rising demand in countries like Rwanda, where BBOXX maintains its Africa headquarters. To maintain inventory for expansion, solar companies collecting small payments over time are constantly seeking debt financing.

Debt from local financial institutions is particularly attractive because payments from customers are collected in the local currency, which generally depreciates over time relative to hard currencies like the dollar or euro. Local currency loans can mitigate the currency exchange risk associated with borrowing from international lenders. However, off-grid solar companies have had trouble securing loans from local financial institutions and if the local lender is interested, often the interest rate is prohibitively high. Commercial banks perceive the solar home system industry as risky and unproven, partly due to a lack of familiarity with the sector. In addition, there is no traditional collateral that can easily be liquidated since the assets are distributed amongst a large number of households. These two barriers have prevented local debt providers from entering the off-grid solar market.

In February of 2017, Rwanda commercial bank Banque Populaire du Rwanda (BPR) and BBOXX finalized a unique $2 million local currency debt facility that mitigates these risks and provides sufficient comfort for the bank. It sets aside a fixed portion of BBOXX receivables in an account to which cash flows as customers pay in regular installments. This deal was the first of its kind in the solar home system industry and provides further confidence to commercial banks that off-grid households are bankable.

Following this transaction in October 2017, BBOXX announced a unique trilateral deal involving both Deutsche Bank and BPR. Deutsche Asset Management’s Essential Capital Consortium loaned $5 million to BBOXX supported by guarantees from the USAID Development Credit Authority and the African Guarantee Fund, as well as a hedge against foreign currency risk through MFX. BPR will manage the facility alongside its own $2 million loan to BBOXX. By bundling these two transactions within a single bank, a significant reduction in operational costs is achieved through a simplified structure that links to receivables coming from mobile money systems controlled by the mobile network operators.

BBOXX has been a thought leader on the cutting edge of cleantech finance in frontier markets and is considering other innovative ideas to access and reduce the cost of working capital to expand its operations. These unchartered financial mechanisms will be necessary to unlock the capital needed by the private sector to scale and meet the demands of Claudine’s children as they grow into adults. As companies manufacturing and selling solar home systems across the continent continue to grow, initiatives like Power Africa that partner with these companies will continue to use new and emerging tools to help bring electricity to those who do not have it.

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Power Africa

A U.S. Government-led partnership that seeks to add 30,000 MW and 60 million electricity connections in sub-Saharan Africa by 2030 > https://bit.ly/2yPx3lJ