A new flagship report from Energy 4 Impact’s Crowd Power programme highlights how the Covid-19 pandemic has resulted in a 25% drop in energy access-related crowdfunding volumes.
Funded by UK aid, through the Transforming Energy Access platform, Crowd Power examines alternative finance for energy access markets, with a particular focus on crowdfunding. The research conducted as part of the programme has culminated in Crowdfunding Energy Access – State of the Market Report 2020-21, a report which explores the key trends in the energy access-related crowdfunding sector between 2020 and 2021.
The report examines 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 themselves experienced a substantial drop in investments from retail crowd investors after the start of the pandemic. Simultaneously, the lenders experienced a fall in demand for debt financing from larger energy access companies who had revised their growth expectations downwards.
However, the report highlights 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. Concessional capital from donors can support the recovery and enhance the growth of the energy sector, deploying co-funding for campaigns, improving investment and loan products, and strengthening pipeline development of crowdfunding platforms. In this regard, the report presents a range of interventions relevant to funders looking to support energy access-related debt crowdfunding.
This research shows that the pandemic impacted equity crowdfunding platforms in different ways. For some, 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.
The report also showcases two new crowdfunding platforms launched in 2021. Wajenzi, an Netherlands-based equity crowdfunding platform focused on African-led start-ups, raised equity for 12 companies during the first six months of 2021, including two energy access companies that received co-funding through the Crowd Power programme. Another new debt crowdfunding platform, the Germany-based frankly.green, targeting 'green' projects and SMEs in low- and middle-income countries, embarked upon its first energy campaign with co-funding from the Crowd Power programme in September 2021. frankly.green currently serves businesses in Ghana, Rwanda, Egypt and Peru and can provide up to $1 million in financing.
Crowd Power is funded by UK aid through their Transforming Energy Access platform and implemented by Energy 4 Impact.
For other reports on crowdfunding click here.