Organisations have joined forces to provide working capital financing to manufacturers and distributors to provide clean cook stoves, water purification systems and biogas digesters
IFC, a member of the World Bank Group, and BIX Capital B.V, a Netherlands-based impact investment company, have joined forces to provide working capital financing to manufacturers and distributors of climate-smart household appliances, an initiative that will help bring clean cook stoves, water purification systems, biogas digesters, and other appliances to low-income African households.
IFC, FMO Netherlands and other investors committed $15 million to BIX Capital, which will provide pre-finance to manufacturers and distributors in this nascent industry, backed by future cash flows from carbon credits generated by clean appliances. The manufacturers cannot currently obtain financing from traditional sources because they have not yet reached breakeven sales volumes.
“This first-of-its-kind initiative uses carbon-credit financing to meet critical needs in the least developed countries,” said Stephanie von Friedeburg, IFC Chief Operating Officer. “It is expected to provide over one million households in Africa with access to climate smart appliances—improving living standards, health, and the environment.”
“BIX is excited to work with IFC and the other investors to jointly promote carbon finance in Africa and other emerging markets,” said Jeroen Blum, Managing Director of BIX Capital. “The project is expected to reduce greenhouse gas emissions by two million tons of carbon emissions over the next five years, and has strong potential to be replicated in other markets.”
The targeted appliances, like clean cook stoves, are specifically designed to improve the health and sanitation of poor consumers—especially women and children—by reducing their workload and expenses, and cutting indoor air pollution and the use of non-renewable forms of bio-mass for fuel.
The use of high efficiency household appliances will in turn reduce carbon emissions. By applying a bundling approach to small-scale emission reduction activity under the UN Framework Convention on Climate Change, this project will help generate carbon credits, which will then be sold to creditworthy carbon buyers through off-take agreements, BIX Capital will pre-finance their portfolio companies based on these off-take agreements.
Amsterdam-based BIX Capital is a joint Shell Foundation/Cardano Development/Goodwell Advisory initiative designed to increase access to essential household products. It will mainly target sub-Saharan African countries, including Kenya, Nigeria, Ethiopia, Malawi, Madagascar, and Uganda.
IFC’s investment in BIX Capital leverages IFC’s strong track record in carbon finance. IFC has established and managed several carbon funds (such as the IFC-Netherlands Carbon Facility, Netherlands European Carbon Facility, and IFC Post-2012 Carbon Facility), and designed a value-added climate product named Carbon Delivery Guarantee. IFC also plans to support BIX Capital by piloting health impact certificates, a new method of quantifying the health benefits experienced by end users of clean appliances.
IFC—a sister organization of the World Bank and member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work with more than 2,000 businesses worldwide, using our capital, expertise, and influence to create markets and opportunities in the toughest areas of the world. In FY17, we delivered a record $19.3 billion in long-term financing for developing countries, leveraging the power of the private sector to help end poverty and boost shared prosperity. For more information, visit www.ifc.org.
About BIX Capital
BIX Capital (a US$15m investment vehicle) provides Impact finance for products that improve lives. BIX is an initiative of the Shell Foundation, Cardano Development and Goodwell Advisory Services. Its primary objective is to increase access to and affordability of high impact products including improved cooking solutions, water purification systems or biogas digesters to low-income people in Sub-Saharan Africa. To date BIX has invested in 4 companies and is currently expanding their portfolio. More information: www.bixcapital.nl