SOLFIN: Affordable lease-to-own financing for solar system | Climate Finance, Ghana 2019
SEED Practitioner Labs Climate Finance in Ghana engaged financial institutions, funders, intermediaries and other SME ecosystem stakeholders over a multi-step process to co-create innovative climate finance products and mechanisms that extend access to long-term financing opportunities for “missing middle” small and growing climate-smart enterprises that struggle to advance beyond the start-up stage and multiply their contributions to climate-smart and socially inclusive economies.
SOLFIN, developed by Wangara Green Ventures, brings together banks, venture capital funds, guarantee funds and solar energy enterprises to create a solar financing mechanism that enables households, public institutions and local SMEs to take up solar energy. Solar enterprises receive financing from both the evergreen fund of Wangara Green Ventures as well as from financial institutions. Key for this product are the concessional loans at interest rates of 16 – 18 % p. a. (in Ghana Cedi terms) and tenors of 5-7 years. These loans are provided can be provided to solar enterprises, who then onlend to end-consumers and thereby take over the repayment risk from financial institutions, allowing lower interest rates and enabling a lease-to-own financing which gradually transfers ownership to the end-consumer upon lease payments. This option leverages the close interaction between solar companies and end-consumers and enable lending for small-scale transactions. Another option is the direct asset-financing of FIs to end-consumers which would apply for rather larger solar installations by industrial purchasers for example which are associated with lower risks. SOLFIN capitalizes on the interaction of banks, green funds, guarantee funds and solar technology providers. Through bringing together different fields, SOLFIN bridges the missing gap of effective financing solar systems.