Aggregator funds are innovative financing mechanisms that redistribute finance from multiple sources to enterprises that cannot access it directly. By aggregating projects and centralising due diligence, reporting, and risk management, aggregator funds could help create a more investable market for humanitarian energy solutions.
A research collaboration between Grand Challenges Canada and Audax Consulting using expert interviews, a practitioner workshop, and two in-depth case studies of emergent aggregator mechanisms (the Refugee Environmental Protection Fund and the P-REC Aggregation Facility) examined the potential role of aggregator funds in addressing the persistent financing gap for last-mile energy distributors operating in humanitarian settings.
The research revealed systemic barriers that restrict access to finance for MSMEs in humanitarian settings and the strong potential for aggregator funds to address them. The case studies demonstrate genuine innovation within humanitarian institutions and a growing private sector appetite to engage with refugee-hosting markets in the presence of appropriate risk-absorbing intermediaries.
However, the study also showed how the institutional environments underpinning humanitarian settings hamper aggregator funds’ execution. Complex funds may distract from the basic need for patient working capital, and there is also a need to be realistic about where market-based solutions are appropriate.
Full findings are shared in the policy brief which provides detailed analysis of the financing barriers facing humanitarian energy markets, as well as insights from the PAF and REP fund models and recommendations for donors, investors, and energy companies. More detailed results will be published in an academic journal article (currently under submission).
Tash Perros, Nazifa Rafa and Paul Quigley.
Image: The HumEn minigrid in Sheder, Ethiopia, which benefits from P-RECs.