Quasi-equity financing is a financing term for funding that is technically “debt” but
has some of the characteristics of equity financing, such as unsecured funding with
flexible repayment terms.39
Debt is money lent to an enterprise; the amount of money borrowed and the
interest on the amount has to be repaid to the lender. Unlike equity, the lenders do
not own a share in the enterprise. To ensure the loan can be repaid the lender
requires strict criteria relating to the profitability of the project and proportion of debt
compared to other finance sources is met.
Finance for an NGO project or enterprise may be obtained from a single or
combination of finance types. All of the projects described in the previous section
involved grant funding at some point, either in the early stages of the project or
more extensively through the initiative lifecycle (which may involve several
“projects”). However, none rely entirely on grants and blend grants with other types
of finance in some aspects of the implementation or delivery model, particularly
with regard to energy enterprises active within the wider model. Investment for a
sustainable energy enterprise typically follows the stages of growth described in
Table 7. Enterprises use a mix of internal finance, grants, equity and debt.
NGOs typically rely heavily on grants. Using equity and debt may be appropriate to
increase the available finance for a project and encourage financially sustainable
operations.
A finance expert should be consulted to discuss the best financial framework for a
particular project or enterprise.
Table 7: Typical stages of growth for an enterprise. Adapted from Ashden
Awards.38
Venture funds - equity
Market-based loans
Social investment – soft-loans and equity
Grants
Internal finance
Pre-start
Start-up
Consolidation
Early growth
Sustained growth
3.2.
Operational models
NGOs and enterprises have developed innovative operational models to provide
potential customers with access to finance (commonly called “micro-finance”) for
purchasing energy products and services. This is often necessary given poor
people’s lack of purchasing power, access to formal finance added to typically
limited awareness of energy products and limited capacity of the private sector in
developing countries. There are three main successful models commonly used:
Renewable Energy to Reduce Poverty in Africa
27