Grants & Donations

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Overview

Under this financing scheme, the enterprise, generally non-profit, finances itself themselves through donor grants and charitable donations. Some enterprises operate on a project model, in which donors finance specific energy installations or deliveries of products. Others operate, and receive funding, for a longer term presence in specific areas. Some enterprises receive donations to directly fund beneficiaries through microfinancing.

This model has substantial overlap with our Subsidization model of Affordability, Community-Based Implementation model of Distribution, and Depth/Holistic Impact model of Social Impact.

Pros

In many cases, these enterprises believe that they cannot achieve their social goals without donor subsidization. They purposely works in areas where income levels are too low to deliver services profitably, because their purpose is to ensure that that population is served. Similarly, these enterprises believe that for their delivery to be effective, they must include additional capacity building or other services which make the model too expensive to be profitable.  This can be due to a complicated product such as a community power generator, a population with low infrastructure, or goals beyond power delivery such as community-building or job creation.

Enterprises seeking this type of financing are often operating at an early stage with an unproven model and can’t access private capital.   In some cases, the enterprises are more likely to receive grants due to their social benefit.  One major grant funder of early-stage enterprises is the World Bank Development Marketplace.  14 enterprises on this map are winners of this competition, 7 of which are currently for-profits or hybrids.

Cons

These enterprises are often constrained in scaling by their ability of access to donor capital. They are also subject to changing donor funding priorities and economic fluctuations.  Some crucial areas, such as monitoring and evaluation are less likely to garner substantial funding or attention from donors. Some donors can be overly numbers focused, prioritizing how many people received energy access or a low cost/kilowatt rather than the holistic impact of implementation. Some enterprises find it much easier to find funding for projects than overhead. Finally, donor funding can create market distortions.

Case Studies

Energy in Common is an online crowdfunding platform which lets individual donors in wealthy countries make zero interest loans for energy purchases by microfinance borrowers in developing countries.

EIC is a non-profit and is funded by donations online lenders make with their loans. The enterprise is specifically focused on making loans in an area which has not yet been proven to be profitable (energy products) and so to incentivize banks to make these loans, is providing them with a free source of capital. By providing this financing (and helping to create linkages with green energy suppliers,) EIC is enabling microfinance institutions to either start energy lending portfolios from scratch or significantly increase their capacity to deliver energy loans to the poor.

However, because EIC is purposely working in an unprofitable area, it needs to finance itself with donations, which it receives through its lending platform. Online lenders typically make a donation of 15-20% of their loan amount to EIC. EIC is also partly financing itself by allowing users to purchase voluntary credits for the carbon saved by its loans. EIC has challenges raising grant funding outside the loan.

Enterprises