How to transform the clean cooking market beyond choosing winners

The clean cooking market is a tough business in developing markets. But the opportunity is immense. In Uganda, only 2 percent of households access clean cooking technologies. Cooking with unclean fuels exposes people, particularly women and children, to toxic indoor pollution.

Better options exist. The clean cooking sector has the potential to create jobs, support clean air and healthier living, and provide access to affordable and clean energy options for low-income, peri-urban, and rural households.

The United Nations Capital Development Fund's (UNCDF) CleanStart programme supports the transformation of the clean cooking sector in Uganda. The programme provides de-risking capital and technical assistance to clean cooking enterprises through the Renewable Energy Challenge Fund (RECF) in partnership with the Embassy of Sweden in Uganda. The last RECF round selected 6 companies to receive grant support.

The aim of Challenge Funds in general is to challenge the private sector to achieve pre-defined objectives that can make a step change in the market. The RECF focused on last-mile distribution, consumer financing, and ICT-enabled solutions to ease the adoption of clean cooking solutions for low-income households.

The Challenge Fund instrument allows the private sector to compete in an efficient and transparent manner. Under this approach, the donor receives good value for money and the partner can achieve its aligned objectives in a commercially-viable way. The Challenge Fund is a critical contributor to broader market transformation goals.

Challenge Funds play an important role in filling a financing gap for small to medium-sized enterprises. Many energy enterprises rely on grant funding to support and scale their business implementation. This is due to lack of commercial resources for these small, innovative yet ‘risky’ enterprises. But with limited grant resources, Challenge Funds can only select a few winners, and implementers often face the dilemma of meeting entrepreneurs with fantastic ideas and intuition but lack the business acumen to run their businesses professionally and reach the necessary scale to meet market demand for clean cooking solutions.

Beyond the Winners

Transforming the clean cooking market goes beyond selecting grant winners.

At UNCDF CleanStart, we want to support more than the few companies who have made it through the competitive financing mechanism. How can we create more winners in the future, and more winners for other opportunities too? This is key if we want to achieve market transformation and affordable access to clean cooking solutions at scale.

The CleanStart investment team saw that, beyond grants, several applicants would benefit with help to support business growth towards sustainability. Through the data collected in the RECF application process, we saw an opportunity to improve their investment readiness through technical advice and tailored recommendations on how to improve their businesses.

That is why UNCDF CleanStart teamed up with a Capstone team from Columbia University’s School of International and Public Affairs (SIPA). The Capstone team reviewed company data gathered during the RECF application process. There was particular focus on a subset of 23 companies, which are representative of the sector as a whole. The goal of the Capstone project was to find a way to narrow the gap between 'winners' and 'losers' and give tailored advice to companies to become more investment ready. Led by Professor Ellen Morris and Professor Phil LaRocco, both who are pioneers in energy access and energy finance, the Capstone team visited Uganda in March 2018 to complete their project.

The Approach: A Doctor's Visit

The RECF process collected a large amount of data on where companies are, and the innovations they seek to implement. Combining that data with clean energy and small enterprise sector expertise was an opportunity to test a new model of sector support.

The Capstone team mimicked providing medical support to patients. This includes:

  • 'Pre-filling medical history form'. The Capstone team reviewed the applications submitted by enterprises in the RECF.
  • 'Seeing a patient and asking follow up questions'. The Capstone team carried out field visits to each enterprise to confirm aspects of the business and gather more details on symptoms that influenced their investment readiness.
  • 'Setting up a treatment plan and prescribing support'. The Capstone team reviewed applications and interview content, benchmarked against other market challenges. This resulted in Cover Letter treatment plans that prescribed support services and activities that could help companies improve and become investment ready.

- Franck Gbaguidi (SIPA class of 2018)

This process yielded early positive feedback from the companies. But potential next steps could include check-up meetings, thinkshops, and referrals to other opportunities such as funders who seek to build investment pipelines in emerging markets such as Uganda.

While still early in the process, we will be checking in with these businesses to see how this support helped. Key questions will be whether their business operations improved or if they were successful in raising other funding sources. We thank the Capstone team for their support, the cover letters and marketing material they created for each company, and their final report which featured recommendations to the sector and market observations. Please contact teresa.le@uncdf.org to access the report.

Transforming the market is a long-term game. But increasing the enterprise base to create more winners is the only way that customers will be better served, and we build a market that delivers on the Sustainable Development Goals.

Interested in hearing more about this project and the sector-based results? Join us on August 17th, 9:30AM EST for a public webinar where the Capstone students will walk through some of the clean cooking sector market transformation insights and challenges they found, while also trying to bring more visibility to viable solutions to support the clean cooking sector.

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