$250m fund to boost businesses in the region

President Jakaya Kikwete (centre) with presidents Uhuru Kenyatta (third right) of Kenya and Yoweri Museveni (second right) of Uganda and (from left) Zanzibar Second Vice President Seif Ali Idd, Rwandan Prime Minister Pierre Damien Habumuremyi and Burundian First Vice President Prosper Bazombaza unveil the East African Court of Justice guidebook during the 12th Extraordinary Summit of EAC Heads of State in Arusha April 30, 2014. PHOTO | FILBERT RWEYEMAMU 

By STEVE MBOGO, Special Correspondent

A new $250 million fund has been announced to be given in grants and interest-free loans to businesses across East Africa.

Businesses that qualify in a competition to provide renewable energy solutions in rural areas and enable small-scale farmers to adapt to climate change through projects like irrigation and widening financing opportunities for small businesses in the region, will benefit.

 

The $250 million fund managed by KPMG and fundraised under the umbrella of Alliance for a Green Revolution in Africa (Agra) was announced by the Africa Enterprise Challenge Fund (AECF).

Priority will be given to businesses that can match the grant applied for, usually a minimum of $250,000 to $1.5 million. The matching does not necessarily have to be in capital commitment but also in kind.

But businesses that commit to match the fund with an equivalent cash injection will be given higher scores.

“Matching is important because the business must share the risk with the fund. The fund money being soft money makes it easier for the qualifying business to easily get further funding from the banks as the banks will be willing to chip in,” said Hugh Scott, the director of AECF.

The fund offers an opportunity for small businesses with innovative ideas to gain from soft financing at a time when interest rates charged by commercial banks in the region are high.

“The key issue here is to fund agribusiness and renewable energy projects,” said Mr Scott.

Businesses have a window of two months, from July 15, to apply for the funding through the AECF website.

The fund will guide the qualified companies in implementing their proposals. Cash injection will be made in the first three years while the repayment will be done in the following three years, completing a cycle of a six-year contract period.

Anjali Saini, the window manager of the fund, said the available fund will be invested in at least 25 companies with the best business ideas that will lead to growth in the rural economies of East Africa.

“In order to qualify, the business ideas must demonstrate a positive impact on the rural poor, deliver increased employment and income opportunities, reduce costs and improve productivity,” she said.

The three categories of business ideas that will be considered for funding are; increasing access to low cost, clean energy for rural businesses and households. This includes cost effective renewable power, commercially viable renewable fuels and other clean energy alternatives.

The second category must benefit rural people and smallholder farmers with products and services that help them adapt to climate change.

This includes the means to diversify livelihoods to reduce climate change vulnerability; increased access to climate resilient technologies; increased access to information and advice on agronomic practices that can help promote resilience against climate variability.