FMO invests US$10mn in clean energy distribution in Africa

FMO, the Dutch Entrepreneurial Development Bank, has provided climate fintech platform Nithio with a USD 10 mln in funding for its investment vehicle, FAIR: the Facility for Adaptation, Inclusion, and Resilience. FAIR provides financing to companies offering clean energy solutions to households and small enterprises in Africa.

Africa is the least climate-resilient continent in the world, experiencing unprecedented rainfall, drought, and flooding that has affected over 215 million people in the last decade. As climate chocks continue to increase across the continent, new and improved energy access is a crucial component to enabling resilience. Together, Nithio and FMO aim to scale financing towards Africa’s climate and energy needs and ensure vulnerable households and small enterprises receive the resources and investment to build climate resilience.                                                     

FMO’s investment will enable Nithio to scale its financing to distributors of solar home systems and solar productive use appliances, such as lighting, communication, irrigation, and cooling systems for households and businesses. These solutions enhance livelihoods, generate jobs, and boost small enterprise productivity. To date, Nithio via FAIR has made 11 investments, providing more than 400,200  people with energy access and supporting 12,100 people with products for enterprises. [1] 

FMO is investing in FAIR via the Access to Energy Fund (AEF), which FMO manages on behalf of the Dutch government's Ministry of Foreign Affairs, to support private sector projects aimed at providing access to renewable energy in emerging markets and developing countries. Dorien Lobeek, Portfolio Manager of ‘Access to Energy Fund’ at FMO said, By investing in the smaller, locally owned borrowers, Nithio contributes to renewable energy access for households, which is right in the center of the AEF mandate. Also, the loans will be in local currency, which is highly additional.”

The investment supports Nithio in broadening its impact on households and  SMEs throughout Africa by providing new or improved energy access to over 160,000 people and supporting nearly 7,000 small enterprises. It will also result in more than 500,000 metric tons of  CO2 emissions avoided.

FMO’s partnerships aligns with Nithio's dedication to expanding energy access equitably for all. For example, Nithio aims to launch an innovative Gender-Lens Financing that incentivizes solar companies to prioritize women customers and address gender disparities in the market. Access to increased energy has been proven to enhance women's job opportunities by 23% and increase empowerment by 11%.

FAIR is a blended finance, open-ended vehicle. FMO joins other impact-driven investors, including US DFC (US International Development Finance Corporation), EDFI-ElectriFI, FSD Africa Investments, Shell Foundation, IFU (Investment Fund for Developing Countries), and the Schmidt Family Foundation. FMO’s investment can be drawn by FAIR either in USD or in synthetic local currency (Kenyan Shilling or Nigerian Naira) to limit exchange rate risk.

FAIR is innovative as it leverages Nithio’s AI-driven risk analytics models to standardize credit risk assessments and inform sustainable financing. This enables FAIR to fill a key market gap by lending not only to large international solar companies but also to small, local distributors that reach last-mile customers.

“We are proud to partner with FMO and look forward to together making a positive impact on households and SMEs across Africa," said Kate Steel, Co-Founder and CEO at Nithio. “FMO's  investment in FAIR will scale energy solutions that improve livelihoods and quality of life while also reducing carbon emissions.”

[1] In estimating the number of people with improved energy access, Nithio considered the number of financed systems, factoring in a discount provision for non-sales and accounting for the percentage of solar products that may not reach customers due to theft, damage, loss, non-adoption, etc..The estimate for support for small enterprises is derived from the number of financed systems and the percentage of off-grid solar customers utilizing products for income-generating activities at home. The CO2 emissions avoided calculation is an estimation over the total lifespan of a system sold.