Rwanda Makes Top 10 List for Clean Energy Investment Opportunities

Rwanda has out-ranked its African peers in the 2018 Climatescope Report published by BloombergNEF (BNEF), which placed it fifth out of 103 countries for creating opportunities in clean energy investment.

This is most likely attributed to its impressive electrification effort that quadrupled over the past seven years — scaling from 10 percent in 2010 to 44 percent in 2017. Both on-grid and off-grid energy solutions made this possible.

“Through 2017, over 185,000 solar home systems and nearly 300,000 solar lanterns have been distributed throughout the country,” said the Climatescope report.

It went on to say that the national utility, Rwanda Energy Group, (REG), has played an integral part in this growth by establishing demarcation zones to reach the ambitious goal of 100 percent electrification by 2024, with 48 percent of that being off-grid.

Today, Rwanda’s clean energy is mostly hydropower, at just under 50 percent. Other energy solutions include solar, natural gas and diesel.

According to the report, clean energy became a top priority of the Rwanda government when it separated the energy and water operations in order to improve efficiency, planning and accountability, attract more investment and increase population access to services. Meeting these targets are a part of national goals articulated in the EDPRS II (Economic Development and Poverty Reduction Strategy) from 2013.

Winifred Ngangure, Head of Investment Promotion at Rwanda Development Board (RDB) said at the 2018 Africa Green Growth Investment Forum, “Leadership is an elusive quality to quantify. Still, this year’s Climatescope offers compelling evidence that developing nations are at the forefront of change toward a cleaner-powered future.”

There are a number of private players in Rwanda’s generation sector, but the most prominent developer is the state-owned energy Development Corporation Ltd. Currently, the country has a backlog of contracted projects, along with an oversupply of on-grid generation. Because of this, the country is said to be “focusing on near-term investment into transmission and distribution, both of which are fully controlled by REG” (Climatescope).

While Rwanda is a leader in clean energy investment in Africa, its leadership is looking broadly to emerging economies across the continent to step up and join them. Ngangure concluded at the Africa Green Growth Investment Forum that “The health and wealth of our continent requires that we prioritize green growth. Not only to increase jobs and grow our economies, but to create a future in which future generations can realize their hopes and dreams.”

How Smaller Traders Are Surviving in the Trade-Financing Game

by Robert J. Bowman, Supply Chain Brain

 

It’s a problem that has long existed for smaller entities, but has become more acute since the Great Recession of 2007-2008. In the wake of that economic crisis, a number of banks backed away from trade and supply-chain financing for all but the largest customers. In other words, the ones that didn’t really need it.

An estimated $74tr of global business is done today on credit terms. Yet small and medium-sized enterprises (SMEs) are finding it harder than ever to secure trade credit. They’re on the lookout for solutions that can replace traditional bank financing, while helping to manage the details of complex global supply chains.

There are two main reasons for the difficulties that SMEs are having in accessing credit today, according to Chris Hale, chief executive officer of global trade-financing specialist Kountable. One concerns the nature of modern-day trade. “The balance sheets of small businesses relative to the opportunities they can originate have a significant mismatch,” Hale says. Often a cross-border transaction will be conducted in the context of a larger contract — say, the procurement of goods for installation within a computer lab. In such a situation banks are reluctant to undertake a credit profile on the small business, “even though it doesn’t intend to own those goods for a second longer than it has do,” he says.

The second stumbling block for SMEs today is structural in nature. A trading company offering financing can use assets in the trade itself as collateral. But banks want cash or facilities to back up the transaction — the kind of resources that a smaller entity might not possess upfront.

Add to that the difficulties that smaller traders have today in meeting identity-management requirements, ensuring that they’re not enabling countries on various watch lists or involved in illegal activities such as money laundering. “Being able to buy from a reputable supplier becomes a challenge for many overseas small businesses,” says Hale. “There’s no standardized way to assess buyers.”

The identity issue is becoming more solvable, however, with the proliferation of mobile devices and a flood of available data on prospective trading partners around the world. Armed with the right tools, SMEs are finding it easier to scale operations in this regard, Hale says. The same technology can also help to provide real-time visibility of goods in transit, as they move through the supply chain to the qualified end customer.

Big data is combining with the distributed nature of high-quality mobile equipment to address the problem, says Hale. In the process, SME’s can stitch together the equivalent of a global supply chain, without the massive investment in hardware and technology, such as point-of-sale machines, barcode scanners and trackers, that would otherwise be required. “Now,” he says, “they’re all apps.”

Companies like Kountable are offering non-traditional approaches to trade financing by structuring themselves like trading companies and engaging in what amounts to “micro joint ventures.” They take title to goods while in transit, and share the margin in their deals.

Not a finance expert by training, Hale was motivated to address the problems of SMEs following the financial crisis. “In evaluating some of those system failures,” he says, “I thought there would be an opportunity to serve a group of human beings who were going to be most desperately impacted by the fallout and structural changes that were coming.”

Hale recently returned from a trip in East Africa, during which he met with governments and ministries to stitch together local ecosystems that could strengthen the position of SMEs in the region. He says the same kind of services can be of equal value to smaller entities in the developed world as well, even in the U.S. domestic economy.

Banks, of course, remain major players in the trade-financing game, albeit in a more restricted role. “Most people still prefer transactions with a bank,” says Hale. But their reluctance to do supply-chain financing deals with many SMEs has opened the door to a number of creative solutions, both in enabling the transactions and ensuring timely payment when they happen.

Look for new technologies such as blockchain, which distributes an accurate and secure transactional record across multiple partners, to provide further options for traders of all sizes. “The way you do business will change dramatically,” says Hale. “Technology kills cost.”

 

 

 

 

Finance App Boosts SMEs Squeezed By Risk

By David Gustin, on Spend Matters

 

I recently had an opportunity to catch up with Chris Hale from Kountable. Kountable is doing some real trade finance, providing pre-shipment finance to resellers in Africa.

That is a high value-added function to many of the large manufacturers who know their emerging market resellers are starved for access to capital.

Kountable has come up with a solution to facilitate the trade, but not in the normal way of providing capital to a reseller in the middle of a buy-sell trade, but by using a cloud-based technology infrastructure, and leveraging operational capabilities in a Cayman entity that takes control of good Freight on Board and sells them CIF to generate offshore revenue.

It’s not for the faint of heart, but one of the founders, Craig Allen, has been doing this for a number of years with banks and others in the Middle East and Latam.

Kountable uses a mobile device to do 3 major things:

  1. Manage Identity – is the reseller who they say they are without using significant manpower to check this out. If you got a reseller who has won a contract to supply a hospital or school, Kountble uses data off the device. They map any data they can get from their contact lists and social media connections and digital footprint into a large digital profile. They combine the digitial footprint with Thomson Reuters World Check engine to qualify counterparties.
  2. Submit proposal – if the reseller has a contract with a teaching hospital that is being built by Chinese Development Construction company (CJIC) in Nairobi, they will submit documentation to allow Kountable to manage validating that documentation.
  3. Deal Approval and Funding – Once contract and purchase order is confirmed, it can be funded. When funded, the reseller pledges the contract and Kountable collects direct from CJIC, and pays suppliers direct. The asset is owned in the Caymans trading entity. Kountable has in country servicing entities for bank account purposes and FX purposes.

In January, Kountable closed a $150M Line of credit and every 30 days they post these trade assets and draw down LOC. With a $150M line, Kountable can scale to $400M to $600M in trades.

Kountable has a number of ways to find resellers in these markets. First is just referrals from banks.  Second, is the large manufacturers like Cisco and Philips who refer resellers to Kountable.  Their dealer network just cannot get enough local finance.  They will issue a PO to their resellers who just cannot find traditional finance with banks.

It’s a very interesting model, and one that helps these emerging market resellers source medical equipment, computers, etc. to much needed projects.

Where Credit Scores Are Scarce, Mobile Devices Fill In The Gaps For Lenders

by PYMNTS, on PYMNTS

 

Financial regulations forced banks to pull back from small business lending in the wake of the financial crisis as pressure to reduce risk exposure increased. Risk mitigation is also behind massive regulations like KYC and anti-money laundering rules. So while SMEs have faced a tough journey finding a bank loan across the globe — and that includes major economies like the U.S. and Europe — small businesses and entrepreneurs in emerging markets find they’re being shut out of the bank lending market altogether.

Alternative lending company Kountable recently spoke with PYMNTS to explain its approach to this problem. According to Chris Hale, Kountable’s founder and CEO, the strategy requires an understanding of the business customer, tapping into the potential of the mobile device and leveraging alternative data.

“Some of these problems are universal,” Hale told PYMNTS of the struggles small businesses face when looking to access financing. “We see them here in the U.S., where an SME can win projects and deals and opportunities that exceed their balance sheet, and therefore they’re prohibited in participating.”

In East Africa, where Kountable operates, a small business that has an opportunity to land a major contract but doesn’t have the money to actually fulfill that job not only means the SME loses out, but local economies do as well. Hale pointed to one hypothetical, in which an SME has the chance to provide brand-name technologies like computers and other hardware to, say, a local hospital.

The challenge in this scenario is that the SME is a critical component to the deal getting completed, but without financing, that small business can’t move forward.

“Manufacturers will say, ‘If you wire me $250,000, I’ll ship you the goods.’ But a hospital might say, ‘When you give me the goods, I’ll give you the $250,000,’” Hale explained, adding that this scenario leads to a sort of “standoff” where a small business can act as the middleman to complete a transaction.

If the small business can’t afford to procure those brand-name goods first, however, the entire transaction can fall apart. It’s this predicament that has Kountable turning to trade finance, as opposed to other types of financing, to reduce risk while still enabling a small business with funds to complete a deal.

“These SMEs are providing goods to high-quality customers, but the value of those goods often exceeds what they would be able to access in a traditional, balance sheet transaction,” the CEO said. “A bank often wouldn’t give our SMEs $250,000 to bring, say, Philips imaging equipment into the country to sell to a hospital.”

Trade finance, he continued, enables the lender to focus on the balance sheet of the end customer — in this case, the hospital — rather than the SME. This structure also enables small businesses to initiate multiple deals at once with Kountable, too, he said.

The Mobile Device

But in addition to SMEs often not having the balance sheet necessary to get bank loans, these small businesses are also lacking data that helps lenders mitigate risk. For Kountable, that’s where the mobile device and alternative data come in.

“The proliferation of handheld mobile devices far outstrips the proliferation of desktops and laptops, certainly,” the executive noted. By reaching entrepreneurs and small business owners via mobile device, it enables Kountable to access data on that device critical to the trade financing process.

“It allows us to leverage the data on the device to manage the identity of our customers, which is very valuable to us in a market where identity is difficult to solve for,” said Hale, adding that often concepts like traditional credit scores and Social Security numbers simply don’t exist in these markets.

Mobile devices also enable Kountable to collaborate with a small business to gain real-time data on the progress of a particular deal.

“We can work with them by providing support on things like third-party logistics and enabling them to deliver to us some of the documentation — like photographs and staging — things that demonstrate that the transaction is progressing on schedule and effectively,” he said. The mobile device facilitates the aggregation of key, real-time data points like geolocation, while it also links Kountable to alternative data sets for compliance purposes like KYC.

“Above all, [the mobile device] is more real-time, more accurate,” the CEO said. “There is this concept of an aggregated virtual self. And a lot of that data that the mobile device engages within the cloud, everything you interface with throughout the app, is often significantly more accurate than your own personal memory.”

Leveraging nontraditional data is critical, especially in developing markets like East Africa, he said, and the mobile device is the richest source of that information. Hale said this technology-first approach will continue with the company as it looks to expand in new markets, including Asia and Latin America, an expansion Kountable is now able to pursue thanks to a $150 million line of credit secured earlier this year for small business lending purposes.