Modern energy for the poor in developing countries is hardly a business concept that sets the hearts of investment professionals racing. But a new Chalmers company now hopes that ordinary people in Europe and elsewhere will use their savings to make a sound investment for a good cause.
There are no technically advanced products involved. In its simplest form, a solar home system consists of a small solar panel, a battery and a single LED lamp. It is often also possible to charge a mobile phone.
The price per month is roughly what it costs to run a paraffin lamp, with the difference that the solar power is free once the repayment period is over.
“Energy is a major cost for poor people in these countries. Having access to cheap power can be the first step out of poverty,” says Andreas Lehner, one of the initiators behind the financing platform Trine.
“The money that is saved can be spent elsewhere, for example on school fees that a family was unable to afford previously,” adds Andreas, who previously also worked on business models for solar energy in developing countries.
Crowdfunding is primarily known as a method for raising venture capital for various cultural projects or for technically advanced consumer products. The enthusiasm of the investors for the idea is often a much stronger driver than the hope of earning large sums of money.
The entrepreneurs behind Trine believe it should be possible to employ the same online method to circumvent one of the major problems when it comes to distributing clean, reliable, cheap energy to the global poor: access to capital.
“Banks are generally not interested in projects like this. The amounts are too low, the risks too high and there is too much hassle,” Andreas Lehner explains.
Trine brokers loans for locally established companies in various African countries, which sell simple solar energy systems for domestic use to people who mostly have no access to power at all.
“As the customers have low incomes, the systems have to be sold on a hire purchase basis. This is where the lack of capital comes in. The companies have to wait a long time before they have earned enough money to afford to order another container from China,” says Andreas Lehner.
He set up Trine two and a half years ago with Sam Manaberi, who has a background in the financial side of solar energy. They met through Chalmers Ventures, the university’s incubator and venture capital company.
Since its start, further partners and employees have joined, including several former Chalmers students, as the business concept has been developed.
So far, the platform has been used to finance twelve projects with eleven companies. The focus is on East Africa. The plan now is to scale up Trine’s operations considerably.
“We are aiming for a hundred financing campaigns in the next two years,” says Andreas Lehner. Most loans have a term of between 18 months and three years, and the return is usually between 5 and 7 per cent per annum. The lenders themselves decide how much they want to invest. But it is not a risk-free investment. “Our aim is to get the default rate down to below five per cent. It is currently at around ten, as one of our twelve projects ended in bankruptcy,” says Andreas Lehner.
“We decided to give all investors compensation that they could invest in a new project,” he adds.
The first people who invested via Trine were mainly friends and acquaintances of the founders and employees, but over 1,200 people throughout the EU have now invested money in various campaigns. This has often been driven by a high level of involvement in climate change issues. Others have acted on the basis of more traditional charitable impulses.
“Few people have seen this primarily as an investment opportunity. But that is a group that we really want to reach,” stresses Andreas Lehner.
“Charity and aid are essential, but if we are to really make a difference and establish financing for clean energy on a large scale, the equation has to include financial profit.”
For Andreas Lehner and his colleagues, there is no contradiction between doing business and doing something good for the planet.
“On the other hand, I have to admit that we have a long way to go as the general view of investment is relatively traditional. However, the idea of sustainable investment is central to Trine, and this is reflected in the company name. It’s an old English word for trinity, symbolising our ecological, social and financial objectives.”
Footnote: Andreas Lehner was awarded the 2017 Karin Markides Innovation Prize for the development of Trine.
Text: Björn Forsman Photo: Anna-Lena Lundqvist