by Christine Roddy
With rising fuel costs, increased charcoal regulation and rising greenhouse gas emissions, customers are increasingly looking for sustainable fuel sources. One solution is to use waste.
Sistema.bio is a social enterprise that is helping meet the demand for clean energy. They manufacture, distribute, sell, and install a unique biodigester system. Their clients are mostly smallholder farmers in East Africa, Latin America, and India.
What are biodigesters?
Biodigesters use anaerobic digestion, a natural process where, in the absence of oxygen, microorganisms break down organic matter (think cow dung) into: (1) a methane-rich biogas that can used for cooking, heat and electricity, and (2) a nutrient-rich organic fertilizer that be applied to crops to improve yields and soil quality.
These biodigesters provide clients a number of benefits: infrastructure to treat their organic waste, a mechanism to self-generate renewable energy, cost savings by replacing fossil fuels and chemical fertilizers, increased crop yields and improved soil, and improved household safety and sanitation conditions without organic waste and chemical fertilizer contamination.
Fueling Geographic Expansion with Blended Finance
In 2017, Sistema.bio initiated their expansion from Latin America to Kenya, where the company created a regional hub to commercialize biodigester systems throughout East Africa that is projected to positively impact 100,000 farmers in Kenya alone over the next three years. Sistema.bio required different kinds of capital to fuel this expansion:
- Sistema.bio closed a Series A investment round for over USD 11 million to drive growth in Kenya. This round was led by ENGIE RDE, EU Electrifi Fund, AlphaMundi, Triodos-Hivos Fund, Dila Capital, EcoEnterprises and other impact and commercial investors.
- Technical assistance grants provided by the AlphaMundi Foundation to support Sistema.bio’s path to profitability. The first grant was provided to help strengthen the Kenyan supply chain, improve operational efficiencies, and meet the large demand for agricultural energy products in this new market. The second grant was provided to conduct an evaluation of sales and loan repayment performance to increase sales and improve loan repayment rates. These technical assistance grants will help mitigate cash flow risks as Sistema.bio continues to pursue a path to profitability.
- A portion of the Series A investment was covered by USAID loan guarantee facility that supports working capital financing for environmental, base of the pyramid products. This loan guarantee helps de-risk a portion of the investment made by one of the impact investors listed above.
When multiple forms of financing is provided this is called blended finance.
Accelerating and scaling impact initiatives that contribute to the SDGs
Sistema.bio provides a great example of how blended finance and public-private partnership initiatives can and will accelerate the expansion and scaling of impact initiatives that contribute directly to the Sustainable Development Goals (SDGs). By reviewing the different types of financing provided to Sistema.bio, we can see how technical assistance and commercial private capital go hand-in-hand to optimize investment impact and ultimately facilitate responsible, sustainable and innovative market development.