Targeting sustained impact in vulnerable markets

Targeting sustained impact in vulnerable markets

EnDev’s Results Based Financing (RBF) Fund for off-grid solar market development in Tanzania re-opened for the period 2019-2020 thanks to additional funding received from the UK government.

€1.5 million EUR in additional incentives are available to the private sector, bringing the total RBF incentive fund to €3.7 million. Until the end of 2018, the RBF fund has leveraged €13 million of private investments which created 1,256 jobs and access to energy for 390,000 people.

The second stage of the RBF Fund for 2019-20 (RBF Stage 2) is based on the foundational principles and structures successfully developed and adapted during RBF programme operations in 2014-18 with strategic redesign of key financing elements to ensure RBF incentives are more sensitively tuned to sustained solar market development in vulnerable and remote Lake and Central Zone markets.

As the RBF Stage 2 programming targets results in more vulnerable markets where firms face challenges in adapting sustainable business models to these substantial, but remote and harder to reach customer segments, it was important to include in the design of the fund a mechanism for ensuring that firms remain committed to customer satisfaction and service quality post-sale. Thus, the RBF Stage 2 fund design incorporates two incentive instalments per claim. The firm receives the first instalment of 80% upon the verified sales of solar products in eligible markets, the second is called the Sustained Market Investment (SMI) instalment. The SMI instalment is only released upon successful SMI verification of consumers and agents.

SNV through EnDev Tanzania has partnered with 60 Decibels to carry out the SMI verification. The verification process conducted by 60 Decibels includes validity of consumer post-sales experiences and agent employment quality benchmarks. Through this partnership we are able to offer valuable insights into consumer profile, experience, and impact to the firms in the RBF. For the SMI verification specifically, the partnership benefits from 60 Decibels’ Lean Data approach, energy benchmarks, and extensive experience in consumer insights and impact in energy access. Through delivery of product and service surveys, customer satisfaction is determined for each of the individual firms using a Net Promoter Score® (NPS). Firms are rewarded their SMI instalment in full upon meeting or exceeding the average level of performance across all players in the programme for the relevant claim window.  Firms with performance below average level of performance will receive a portion of the SMI instalment.

While these results are confidential and only shared with participating firms, the partnership is a significant milestone in the evolution of RBF design and implementation. We are excited to learn together about the opportunities for more fully integrating outcome-based results into incentive payments, alongside the more traditional output-based results that RBFs more typically use.

To learn more about 60 Decibels, read their new report “Why off-grid energy matters – a 60 Decibels impact performance report.

What is Results Based Financing?

In short, Results Based Financing is banking on development impact. RBF ensures that development funding is linked to pre-agreed and verified results, and that funding is provided when the results are achieved. Through a range of mechanisms, RBF helps deliver development outcomes, improves accountability, and drives both innovation and efficiency.