Although blended finance transactions are a widely used approach, UNCDF’s interventions can also help unlock additional private finance in a sequential way.

In November 2018, UNCDF’s LDC Investment Platform (LDCIP), the pillar supporting UNCDF’s investment operations, transacted a US$250,000 loan to a Ugandan renewable energy company, Aptech - which needed funding to act as working capital facility for inventory financing.

At the time, Aptech was unable to raise growth finance from traditional lenders as the company had no collateral and no credit history. UNCDF stepped in as the first ever external lender with an unsecured 2-year tenor facility. About a year later, following APTECH’s timely payment of four installments to UNCDF, STANBIC Bank, a local Ugandan commercial bank, got interested into the company and offered a US$800,000 facility, including invoice discounting (USS$550,000), bid guarantees (US$100,000), and an import loan (US$150,000). In this case, UNCDF’s intervention sequentially achieved a 3.2x leverage..

Development Challenge:

In 2015, more than 60% of the Ugandan population had no access to basic, or safely managed sources of drinking water. In terms of water supply for agriculture, Uganda is experiencing severe droughts and fluctuating rain patterns as a result of climate change. Around 70% of Ugandans depend on agriculture for their livelihood, so droughts can lead to food shortages. In conclusion, there is a high need for clean drinking water and for water irrigation in Uganda.

Development Impact:

With current improvements in price and performance of off-grid solar products, improved batteries, low-cost solar PV, and super-efficient appliances, smaller size and decreasing costs for solar pumps, rural households and businesses can leapfrog to a more energy efficient way of living compared to the urban, grid-connected population. Solar-powered water pumps can enhance agricultural productivity, employment and income generating activities.

The borrower:

Aptech is a Ugandan renewable energy company distributing, installing, and maintaining solar powered solutions for water pumping and off-grid power generation for diverse applications (drinking water supply, irrigation, electric power, street lighting). Solar powered water pumping remains the company’s core business representing more than two thirds of total revenues.

Use of Proceeds:

The UNCDF loan was used as working capital for expansion of the Ugandan business, including ordering inventory (solar components) as well as financing the installation period of solar pumping systems until payment by the client is executed. First client’s payment usually comes 2-3 months after start of construction.