View
98
Download
4
Category
Preview:
Citation preview
THE AECF AT EIGHT
2015 IMPACT
REPORT
2
The AECF is a special partnership initiative of the Alliance for a Green Revolution in Africa (AGRA). AGRA is a dynamic, African-led partner-ship working across the continent to help millions of small-scale farmers and their families lift themselves out of poverty and hunger. Through its programmes, AGRA develops practical solutions to significantly boost farm productivity and incomes whilst safeguarding the environment. AGRA, with initial support from the Rockerfeller Foundation and the Bill & Melinda Gates Foundation, maintains offices in Nairobi, Kenya and Accra, Ghana.
www.agra.org
This report is the outcome of close collaboration between KPMG IDAS and IPE Triple Line Consulting
KPMG International Development Advisory Services (IDAS) is the Fund Manager for the AECF. KPMG IDAS is a Centre of Excellence in devel-opment advisory work on the continent. It has adopted a pan-African approach to development, employing full-time development experts complemented by a network of champions across the continent to deliver services in programme and fund management, organisational assessment and development, rebuilding fragile and conflict affected states, renewable energy and adaptation to climate change, private sec-tor development, good governance and public healthcare.
www.kpmg.com
IPE Triple Line has worked with KPMG IDAS since the AECF was launched in the capacity of AECF’s monitoring, evaluation and learning partner. Its diverse international staff and network of consultants are experts in monitoring, evaluation and learning, particularly in support-ing the performance assessment of private-sector linked assistance and challenge funds. Other core service areas include: private sector development, governance and fragile stage, challenge fund design and management and social and economic empowerment.
www.tripleline.c mo
The views expressed in this report are those of the Fund Manager and do not necessarily reflect the views of AGRA or the AECF’s donors.
The AECF portfolio covers a wide variety of projects, many of which have particular methodological challenges as-sociated with impact assessment. The development impact data and analysis presented in this report represents the best endeavours of the Fund Manager and its Monitoring, Evaluation and Learning partner. It is important to note that assessing the development impact of the projects that the AECF funds is an ongoing process and that data may be further refined.
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (‘KPMG International’), a Swiss entity.
All photos are from KMPG IDAS unless otherwise credited.
3
AECF Impact Report 2015
Foreword from the ChairI was delighted to be appointed Chair of the AECF in early 2016. I was brought up in Ghana and as the grandson
of cocoa and cassava farmers in Akyem Tafo and the beneficiary myself of a Cocoa Marketing Board Scholar-
ship. I understand very well the transformative potential of the private sector on livelihoods and opportunities for
rural farming communities.
The AECF funds businesses in the areas of agriculture, agribusiness, rural financial services and communications
systems, renewable energy and adaptations to combat climate change that otherwise would not have access
to sufficient capital. The AECF has received support from governments (Australia, Canada, Denmark, The Neth-
erlands, Sweden and United Kingdom), and international financial institutions (Consultative Group to Assist the
Poor and IFAD)
Over the past eight years, the AECF has demonstrated the strength of the challenge fund mechanism, the ability
of the AECF to deliver, and the development impact of making catalytic investments in the private sector across
Sub-Saharan Africa. In 2015, the impact of the AECF was greater than ever before with over 10 million rural
people experiencing improvements in their livelihoods as a result of our support. Since 2008, the AECF has made
a significant impact by funding 257 projects in 23 Sub-Saharan African countries, which have generated $471
million in additional net benefit. AECF investments create change in market systems, encourage innovative busi-
nesses and deepen the impact of private sector investment on the rural poor. Moreover, the AECF helps builds
capacity and sustainable businesses by requiring successful applicants to contribute co-financing and have good
business practices.
Since last year, the AECF has been undergoing a change program aimed at increasing its reach and impact. Key
to this change has been the transition of the AECF to be a company limited by guarantee managed by a Board of
which I am Chair. We are a proudly Pan African Fund and the make-up of our newly constituted Board reflects a
commitment to expand the Funds reach beyond its existing areas of operation. During the transition all aspects
of AECF management will become the responsibility of AECF Limited while we continue to be part of the AGRA
family. This new structure will allow for greater efficiencies, agility and accountability, and will help ensure that the
AECF is able to innovate in the products it provides and better serve the needs of African businesses.
I would like to thank our donors for their generous support and the Fund Manager for their great work over the
past eight years. We are looking forward, as a Board, to taking the AECF onwards and upwards to meet new
challenges and opportunities in a changing global environment. Support for innovative and entrepreneurial ap-
proaches to rural development has never been more critical to unlocking the huge but too often neglected po-
tential of African rural communities. The AECF will play its full part with our partners in the business and develop-
ment communities to support this great cause so that yet more lives may be transformed.
Lord Paul Boateng, Chair of the AECF Board
4
124
71
31
Small Medium Large
Over 70% of Africa’s poor people live in rural areas,
with 41% of sub Saharan Africa living on less than
US$1.25 per day in 2015i. The majority of these
depend on agricultural activity for their livelihoods but
this is hindered by systemic market failures result-
ing from a lack of access to infrastructure, financial
services and information.
The Africa Enterprise Challenge Fund is a multi donor funded challenge fund that seeks to ha nessr
governments, international policy makers and
donors to stimulate private sector African entrepre-
neurs. By providing grants and non-recourse loans
to projects focused on agriculture, renewable energy
and adaptation to climate change and access to
financial services, the Fund generates innovative and
profitable ways of improving how markets work for
the rural poor.
The Fund Manager identifies these new ideas by
running a series of thematically and geographically
targeted competitions requiring potential applicants
to initially submit their ideas and concepts. These are
investigated and analysed by an Investment Commit-
tee comprised of independent sector specialists with
those shortlisted subsequently developing compre-
hensive business plans. Further analysis and inter-
views lead to the selection of winners who are funded
with up to US$1.5m for a period of three years, with
a further three years of monitoring and support from
the Fund Manager.
What is the AECF?
The AECF targets primarily small and medium sized
enterprises operating in sectors where opportunities
for vibrant competition and market distortion thrive.
However, it also provides funding to larger compa-
nies seeking to implement projects targeting the poor
that would not otherwise offer sufficient returns to be
implemented
The majority of our grantees are well established firms
even if the projects that are funded are new ventures
for them. Only in the REACT Window, which focuses
on renewable energy and adaptation to climate, are
most grantees – more than 80% - start-ups, reflecting
the highly innovative and early starter nature of this
market.
Who is funded?
Non Start-up, 64%
Start up, 36%
5
AECF Impact Report 2015
Introduction 9
The AECF’s Impact in 2015 13
Impact by sector in 2015 15
Business performance in 2015 22
The AECF’s Impact over the last eight years 25
Cumulative impact by sector 28
Cumulative impact by Window 30
The AECF’s impact from job creation 34
The AECF at Eight – What has been learned from managing the AECF 39
Core concepts – how we affected market systems impact, additionality and innovation 40
The AECF as a mechanism for inducing market systems change 40
Additionality 46
Innovation 48
Key tools for success 51
Grants and loans 51
Sharing risk with our grantees and other investors 53
AECF Connect: Supporting the transition to commercial funding 54
Implementation processes and experiences 57
Starting races between similar business models 57
Developing a cost-effective results measurement system 58
Learning from project failure 62
How AECF projects reach the poor – examples of poultry and seeds 64
Working towards addressing gender better 68
Wider public benefits in the REACT portfolio 71
Table of Contents
6
Our greatest achievement has been to expand the toolbox of the smallholder farmer using new technologies and novel approaches.
“”
7
AECF Impact Report 2015
7
A note from the AECF DirectorDear readers,
As leader of the Fund Management Team† since its launch at the World Economic Forum in Cape Town in June 2008,
I have been privileged to have seen the AECF grow from a relatively small Challenge Fund of US$35m to the exciting,
innovative and transformative set of eight funds that it is today. The US$247m generously pledged by the AECF’s donors
has been committed to support over 250 business ideas across 23 countries in Sub-Saharan Africa. In 2015, we esti-
mate the impact was greater than ever before with over 10m rural people experiencing improvements in their lives and
their livelihoods. Whilst these numbers are impressive it is the human stories that bring the AECF’s work to light. In this,
the last of our annual portfolio reports, we offer some of these stories and lessons from our experience over the past
eight years, as well as an overview of the Fund’s impact in 2015.
The AECF’s greatest achievement has been to expand the toolbox of the smallholder farmer using new technologies
and novel approaches. AECF supported farmers can plant high yielding seeds protected by insurance using advice from television shows watched on devices powered by renewable energy. They can sell their output into ver callyti
integrated value chains and use the proceeds to invest through low collateral equipment leasing schemes. It is this
multi-faceted approach blending traditional farming and extension with 21st century technology that really sets the AECF
apart. It has also shown us the future for rural development – the development, capture and dissemination of data and
knowledge through modern media using mobile technology as the primary channel to promote financial and information
inclusion.
The AECF has been a terrific achievement that should make the AECF’s donors feel justifiably proud and I have all con-
fidence in the new team taking up the baton from next year. But this is for the future. To my colleagues, partner compa-
nies and individual consultants who have made the AECF such a success I offer my sincere thanks. Let us remember
that we started races rather than picked winners, that we supported disruptive innovation whenever we could find it, and
took as much risk as we dared but always in pursuit of our purpose of making Africa’s rural areas better places to live
and work for the majority of the population, and our particular target group, the rural poor.
Hugh Scott
AECF Director, KPMG International Development Advisory Services
† From 2008 to the present the AECF has been a special partnership initiative of AGRA and managed by a team (the “FM” team) from KPMG’s International Development Advisory Services practice (KPMG IDAS). The AECF is now in the process of being registered as a not-for-profit entity that will ensure its future.
8
When the AECF was launched in 2008, its mandate
was to invest just over US$35m in innovative projects
which would enable the rural poor to engage in more
meaningful economic activity. By the end of 2009, the
first 25 projects that the AECF funded had directly
benefited over 200,000 poor people through improv-
ing their access to agricultural markets and products.
Eight years on, the AECF has grown to a US$247m
multi-donor fund providing repayable and non-repay-
able grants to over 250 projects focused on agribusi-
ness, renewable energy and adaptation to climate
change, and access to information and financial
services for rural households across Africa. Our proj-
ects are spread across 23 countries in sub-Saharan
Africa, and impacted the lives of over 10 million poor
people in 2015 alone.
Despite this rapid growth in size and across sec-
tors, the AECF’s focus has always been the same: to
fund innovative business ideas in Africa, improve the
functioning of market systems, and ultimately enable
those living in rural areas to reap long lasting benefits
and lift themselves out of poverty.
The Africa Enterprise Challenge Fund
Introduction
8
We view our core objective as contributing to the growth of sub-
Saharan Africa’s agricultural, agribusiness and renewable energy
sectors resulting in sustainable benefits for the rural poor. “
”
9
AECF Impact Report 2015
Growth of Sub-Saharan Africa’s agricultural,
agribusiness, and renewable energy sectors resulting in sustainable benefits for the
rural poor
COREOBJECTIVE
Funding clusters of projects with similar business models
Selecting projects with maximum potential for market systems impact
Requirement to co-finance
Running targeted competitions
Proactive risk management
and compliance
Effective monitoring and results
measurement
impact rural households
Leveraging private Developing mar
kets
&
acce
ssib
le te
chnologies
with the potential to
facilitating mark
et e
ntry
for
sector investment
inno
vativ
e,
affordable &
rural households & b
usin
esse
s
deve
lopm
ent & use of
to maxim
ise impact
businesses & business ideas
working with
the
rura
l poo
r&
share risk
Stim
ulating th
eFunding innovative
STRATEGIC OBJECTIVES
The AECF’s Objectives
9
The AECF’s core objective is to contribute to the growth of sub-Saharan Africa’s agricultural, agri-
business and renewable energy sectors resulting in sustainable benefits for the rural poor. This is
based upon four further strategic objectives, all of which are central to decision making when awarding grants
and loans to businesses.
The Competitive Process
10
The first strategic objective is to fund innovative
and commercially sustainable business ideas
that have the potential to positively impact the
incomes of rural households. Yet we understand
that innovation is relative, and a project that is simply
new for a company in a specific country can have as
much impact on poor people as a global first.
Secondly, the AECF aims to improve the way ag-
ricultural and other market systems work, there-
by facilitating market entry for rural poor house-
holds and businesses. Improving the way market
systems function makes it more probable that the
resulting improvements in livelihoods are sustainable
and replicable, and paves the way for other players to
enter and deepen markets.
Thirdly, the AECF aims to stimulate the devel-
opment and use of affordable and accessible
technologies for the benefit of the rural poor.
Above all, we prioritise investments in business ideas
that utilise and test technologies with the potential to
scale.
Finally, ensuring AECF funds have a catalytic
effect by leveraging private sector investment is
a fundamental part of our strategy. This maximises
the impact of our investments and also ensures risks
are shared with recipient businesses and third
party funders.
In order to execute our strategic objectives, we utilise
a range of tools and levers when selecting, contract-
ing, managing and monitoring projects. Some of
these, like the competition format and requirement for
the businesses to match our investments, are typical
of almost all challenge funds. Others, such as funding
clusters of projects with similar business models in
order to “start races rather than pick winners”, are
more unique to the AECF.
10 Photo Credit: Esco Kivu
11
AECF Impact Report 2015
The 2014 Impact Report was the first time we dissemi-
nated our results in this format. We provided infor-
mation about how the AECF is structured, where we
invested our donors money, and what impact these
funds had in 2014. We also explained how our invest-
ments are helping to address some of Africa’s most
urgent development challenges, and shared some of
the tools and techniques we learnt about running a
successful challenge fund.
This year, the theme of our report is The AECF at
Eight. The report comes at an exciting time for the
Fund, with the creation of The AECF as a new legal
entity, the appointment of a new Board and CEO and
with significant changes in the way we are set up and
managed. It is therefore timely to take stock of the
impact we have had over the last eight years and to
provide some thoughts on what has worked, what
could have been done better.
The first chapter looks specifically at the develop-
ment impact and financial performance of the AECF
portfolio in 2015, with analysis by sector, window and
region. The second chapter is an overview of our
performance since inception in 2008, identifying key
trends and patterns in impact over time. The final
chapter covers what has been learned from the pro-
cess of managing the AECF and from the projects that
the AECF has funded. We look at the critical success
factors for high impact projects, consider what types
of projects have the greatest market systems impact,
and ask why projects fail and how we could capture
gender better.
We hope that sharing these lessons will enable
other challenge funds, impact investors and mar-
ket systems programmes to be able to learn from,
and build upon, our successes and failures.
What’s in this report?
11Photo Credit: Solar Now
12
In 2015 the AECF generated a total net increase in income of US$153m for over two million beneficiary households, reaching more than 10 million poor and mostly rural people throughout sub Saharan Africa.
“”
12
13
AECF Impact Report 2015
13
The AECF’s impact in 2015In 2015 the AECF generated a total net increase in
income of US$153m for over two million beneficiary
households, reaching more than 10 million poor and
mostly rural people throughout sub Saharan Africa. This
continues our achievement of increasing impact in each
of the eight years that the AECF has been in operation.
The headline impact from the portfolio continues to rise
substantially year on year as more projects reach scale,
with the number of households increasing by 44% and
net benefit increasing by 36% since 2014. The average
net benefit per household is slightly lower than in 2014,
at US$73. This is also lower than the targeted amount
US$125 per household because a substantial proportion
of our impact has been generated by projects focused
on input supply and renewable energy, which affect a
very large number of households but at a relatively small
financial amount for each. For these projects welfare
impacts are significant but difficult to quantify in mon-
etary terms. Despite this, the total net benefitii generated
by the projects we funded is above target, due to the
high number of households reached and the continu-
ing contribution to impact by projects that have passed
beyond the six year management period.
The AECF measures its impact principally through a
calculation of the benefit generated for a poor house-
hold engaging in a project we fund, after taking out the
participation costs as well as the income that would
have been achieved without taking part in the project
(the opportunity cost). However, the AECF also mea-
sures performance at the level of the business in the
form of numbers of direct formal jobs created. In 2015
the number of jobs created and maintained in AECF-
funded projects increased to 8,000. This calculation
also does not take into consideration the quality of jobs
nor does it include other jobs created within the value
chain or in the local community as an indirect result of
our investments.
Number of jobscreated
Net WageBill
HOUSEHOLD LEVEL INDICATORS
BUSINESS LEVEL INDICATORS
Number ofhouseholds benefiting
Average net benefit per household
Total NetBenefit
DEVELOPMENTIMPACT
The AECF’s development impact indicators
14
US$153M totalnet benefit to poor
households
205,000 tonnes ofCO2e emissions
displaced
An average of US$73 per household
Better quality agricultural inputs for over 825,000 farming
households
Improved access to clean, sustainable
energy for over 500,000 families
Over 2 million households in sub-Saharan Africa
reached - approximately 10 million people
$73
The AECF’s impact in 2015
15
AECF Impact Report 2015
One of the AECF’s strategic objectives is to stimulate the development of large scale affordable technologies
for the benefit of the rural poor. AECF-funded input supply projects, which mainly consist of various models to
grow and disseminate high yielding seeds but also include improved fertilisers and livestock vaccines, led to
better quality inputs for over 825,000 farming households in 2015. Not only does this generate income from the
sale of surplus but, as most of these projects target staple food crops, there is a very positive impact on food
security.
Our efforts also stimulate the development of low cost clean energy solutions that help smallholder farmers
react to climate change and obtain access to energy. We have facilitated the development or roll out of new
technologies and business models that are revolutionising lifestyles in rural Africa. Cluster financing of a range
of initiatives in solar electricity has brought improved access to clean, sustainable energy for more than 500,000
households and tripled the installed clean energy capacity from 2014 to 7.26MW. As a consequence, we have
also tripled the amount of CO2e emissions displaced. In addition to the financial benefits of reducing household
energy costs, these technologies bring numerous quality of life impacts to rural households, from breathing in
less smoke to being able to study or socialise in the evenings.
The table below provides a breakdown by sector, household and project of net additional income created by the
AECF’s projects in 2015. It should be noted that a large proportion of grantees receive funding at various stages in
their development from a range of other donors and impact investors as well as from commercial finance or their
own funds. Issues of additionality are discussed later in this report, but it should be noted that where we cannot
establish a solid case for additionality we do not count the impact from that project. This is a critical aspect of the
AECF: our resources always represent the key transformational element in the project either in terms of de-risking
the project to allow it to happen or enabling it to grow faster than would otherwise have occurred.
The AECF consists of a series of Windows, each with up to four separate competitions. As these Windows affect a
number of different sectors, we have developed our analysis of impact on a sector basis – this is principally different
types of agribusiness but also adaptation to climate change, financial services, information and renewable energy.
Impact by sector in 2015
2015 development impact by sector (all active projects)
Sector Total number of households
Average number of
households per project
Total net benefit (US$)
Net benefit per household
(US$)
Adaptation 2,365 169 195,381 83
Agribusiness: agro-processing 51,687 2,154 21,598,365 418
Agribusiness: input supply 844,070 22,212 65,148,715 77
Agribusiness: marketing and distribution 15,049 2,150 4,920,044 327
Agribusiness: primary production 16,847 455 2,222,231 132
Financial services 192,957 12,864 14,168,987 73
Information 455,112 65,016 26,151,482 57
Renewable energy 509,915 19,612 19,042,070 37
TOTAL 2,088,002 12,429 153,447,274 73
16
With the more recent focus on renewable energy,
financial services and information, the AECF has truly
become a multi-sectoral development platform.“
”
57% of the projects are in the agribusiness sector –
a reflection of the core objective of the AECF. In 2015,
44% of the impacted households and 64% of the
net benefit from projects accrue to this sector. As
the AECF has grown and evolved from a US$35m
agribusiness fund into a US$247m multi-sectoral
investment vehicle, our scope has changed to target
a wider range of needs for rural people including
a focus on renewable energy, financial services
and information.
Disaggregating the portfolio by the average net ben-
efit needs some care because of the small number
of projects in some sectors and the presence of
very high impact projects in others. Overall, projects
where households are consumers, such as input
supply, are easier to rapidly and substantially scale
but produce a more limited impact per household on
average whereas those with households as produc-
ers require greater management input but have the
potential to generate transformative levels of income.
Supporting farmers to adapt to the consequences of
climate change and become more resilient is a new
but increasingly important element of the AECF’s
work. At the end of 2015, the active adaptation proj-
ects in our portfolio were relatively new with a low
number of beneficiary households on average. The
total number of households is expected to signifi-
cantly increase as these projects begin to mature and
other more recently contracted projects in this sector
start implementation.
As noted above, agribusiness projects impacted by
far the largest number of households and gener-
ated the majority of the development impact for the
portfolio in 2015. Agro-processing and marketing and
distribution enterprises reach a smaller number of
farmers on average, but their business models tend
to involve a greater level of engagement with those
who produce for them, leading to the generation of
a higher average net benefit per household. Many of
these grantees use comprehensive management in-
formation systems to track individual farmer produc-
tion, sometimes in the context of organic certification
schemes. The further exploitation of these informa-
tion systems by the AECF in collecting additional data
on aspects such as gender represents an important
opportunity for the future.
A quarter of the projects funded by the AECF in 2015
are in the input supply sector. They consistently
engage a large average number of households but
at a lower level of benefit per household compared
to other agribusiness projects. Most comprise large
scale distribution of improved seed by established
Photo Credit: Esco Kivu
AECF Impact Report 2015
companies, principally of food crops such as maize.
Although significant yield increases can be generated,
overall production tends to be low in absolute terms
because of the small average size of plots farmed by
smallholder beneficiaries.
Primary production projects had a low average impact
in 2015 because many involve tree crops with long
establishment phases and because some with poten-
tially high impact were affected by the Ebola outbreak
in West Africa. With ongoing support, this is likely to
improve in the future.
Financial service projects include mobile payments sys-
tems, crop and livestock insurance and various novel
micro finance mechanisms such as leasing and hire
purchase. The average income and size of these proj-
ects are skewed by the contribution of mobile money
projects, which generated a low cost saving but for
large numbers of beneficiaries. This emphasis on small
transactions conceals potentially large development
impact that can be generated through access to micro-
finance projects. For example, the net benefit from two
schemes established in Somalia to promote Sharia
compliant lending was around US$1,000 per house-
hold in 2015 (see box). Some business models such as
crop insurance and equipment leasing are operational
but need further work whilst others have more proven
approaches that are starting to be replicated. Financial
tools are increasingly bundled with other services and
goods in collaborative arrangements between financial
services companies, input suppliers and technology
developers and here lies significant potential for the
future.
The AECF provides funding to two MFIs, Kaah
Express and Micro Dahab, in Somalia and Somalil-
and to support the development of Sharia compliant
loans to increase access to finance for the currently
unbanked and to drive regulatory change in the
banking sector. This enables previously excluded
SMEs to access reasonably priced finance and avoid
high interest rates from informal hagbad lenders. Al-
though the market is sometimes undercut by donors
offering no cost loans, both companies have estab-
lished networks and between them loaned money to
4,500 households in 2015 each generating around
US$1,000 in development impact. Despite the dif-
ficult economic conditions in Somaliland, repayment
rates are above 95%. 60% of Microdahab’s SME
clients are women.
Nuuru Maxamed has been running a retail shop in Downtown,
Hargeisa for the past three years and had been struggling to
increase her inventory. Prior to obtaining this first time credit
of US$500 from Kaah Express she had relied on funding from
her family who sent her money from abroad. She is particularly
pleased that she will be less of a burden to her children in the
future.
Hibo Ismail is a successful dressmaker based in Hargeisa,
averaging sales of at least US$3,000 per month in her busi-
ness. She is a second time borrower having repaid US$500
and is now repaying a US$1,000 loan, both over a six month
period. She intends to continue to grow her stock to increase
volumes and also hire other young women to help her expand
the business.
Strengthening formal financial services in Somaliland
17
18
The strong performance in the information sector is
generated by the highly successful Shamba Shape
Up agricultural advisory television show in Kenya that
will be complemented in future with its successor,
iShamba, a mobile information platform. The sec-
tor has the second highest total impact in 2015 and
contributes 16% of the total net benefit of the portfo-
lio. The potential for information to make transforma-
tional change for very little cost per person reached
is tremendous and with the rapid spread of mobile
information technology and the development of the
culture to use it, this represents an opportunity for a
significant improvement in the effectiveness of aid.
The average benefit in the renewable energy sector
is initially low as most of the projects going to scale
involve households having to pay off initial invest-
ment in equipment. However four renewable energy
projects in East Africa are starting to achieve very
substantial reach. Overall development impact for
renewable energy is strong in 2015 with 12% of the
In addition to reaching over half a million households
in 2015, the renewable energy projects in our portfolio
have also improved the livelihoods of 5,148 agents by
US$516 on average – a total benefit of US$2.6m. The
majority of these work for PAYGO solar businesses,
which rely on incentivised agents in order to develop
and maintain their rural distribution networks.
As these agents sell solar home systems on commis-
sion and do not have permanent contracts with the
businesses, we do not count them as part of the jobs
created in the businesses we fund. Nevertheless, the
revenue these agents gain from selling solar home
systems can be transformative, and working as an
agent can often lead to a better quality job as a tech-
nician or manager within these companies.
Impact on agents in renewable energy projects
19
AECF Impact Report 2015
Total net benefit in 2015 (US$) by project, by sector (all active projects)
SectorAdaptationAgribusinessFinancial ServicesInformationRenewable Energy
Adaptation Agribusiness Financial Services Information Renewable Energy
Sector
portfolio total. Financing of a number of solar energy
projects by the AECF REACT window has generated
real market disruption with multiple business models
being developed. The potential market is huge, with 620
million people in sub Saharan Africa not connected to
the electricity grid of which we have reached 2.5 million
and, although not all projects have been successful, we
expect these initial investments to generate increasing
benefit in the years to come.
Each box represents a project in the AECF portfolio, with the area of the box demonstrating the total net benefit generated by that project
in 2015.
20
Across the portfolio, projects whose end beneficia-
ries are buyers of goods or services (referred to here
as ‘consumers’) from the AECF grantee reach a large
number of households and generate a relatively lower
net benefit per household. Projects whose end bene-
ficiaries are producing goods or services (or ‘produc-
ers’) for the grantee conversely have a smaller reach,
but generate an average net benefit per household
which is over five times greater.
Although the scale and benefit between beneficiaries
as consumers and producers varies between dif-
ferent windows, the portfolio as a whole is heavily
biased towards supporting projects that engage with
poor households as consumers. This has impor-
tant implications in the development context as it
means that while much of the funding provided by
the AECF can be expected to make only marginal
direct improvements in household livelihoods, it still
has significant potential to generate market system
change – particularly in factor markets such as finan-
cial services and information - as more of the market
is affected.
Projects which engage with poor households as pro-
ducers represent a greater potential for transforma-
tive change in welfare and economic capacity at the
household level, and the opportunity for really moving
people out of poverty over time. As the AECF looks to
both stimulate market system change and generate
benefit directly for the rural poor it seeks a balance
between these approaches to ensure both objectives
are adequately addressed.
This quantitative measurement of impact in terms
of monetary gain ignores many of the qualitative
benefits, especially for households as consumers.
In the REACT window for example, there are ex-
tensive quality of life improvements from using new
forms of energy that are not captured by the existing
quantitative reporting. Elaboration of this and further
discussion on market system change can be found in
chapter three of this report.
Consumer versus producer projects
19,227
877
CONSUMER
$68
$337
PRODUCER
Average number of households reached per project
Average net benefit per household (US$)
0<1 1 2 3 4 5 6
2
4
6
8
10
12
Adaptation
Agribusiness Marketing and distribution
Agribusiness Agro-processing
Agribusiness Primary production
Agribusiness Input supply
Financial Services
Renewable EnergyInformation
Project Age (Years)
Tota
l net
ben
efit (
US$
)
21
AECF Impact Report 2015
Different sectors generate benefit at different rates
depending on how long it takes the projects funded
to become established and move to scale. Taking a
snapshot of 2015 (see graph above) we can see the
benefit generated as projects get older within their
specific sectors, from a year or less up to the maxi-
mum of six years when the management involvement
of the AECF ends. Outliers and climatic effects on
production make some difference to annual figures
but broad trends can be identified. Some sectors
contain only younger projects and so do not have
figures for years five and six.
Within agribusiness, input supply projects demon-
strate a rapid growth in impact as projects quickly
scale through relatively easy replication to very large
numbers of beneficiaries. Climatic conditions and
disease in one major seed supplier caused some
variation recently, but successful recovery can be
seen in year six. Conversely, primary production proj-
ects benefits remain low in early years because of the
long term nature of establishing the production pro-
cess. Agro-processing projects in general take some
years of investment in facilities and structures before
starting to generate a return. This is evident in the net
benefit figures - only after year four does benefit in
the sector start to increase substantially.
The performance of projects focused on providing
information to the rural poor is influenced by the one
high impact project in the sector which came to scale
and is currently four years old. On average infor-
mation projects generate immediate benefits after
investment. Like input supplies, projects can rapidly
scale to large numbers of beneficiaries.
Finally, projects focused on providing renewable
energy solutions to the rural poor take several years
to generate benefit as end users pay off initial invest-
ment in solar systems, but then begin to provide
significant benefit through cost savings from year two
onwards.
Average net benefit per project, by sector and project age
0<1 1 2 3 4 5 6
2
4
6
8
10
12
Adaptation
Agribusiness Marketing and distribution
Agribusiness Agro-processing
Agribusiness Primary production
Agribusiness Input supply
Financial Services
Renewable EnergyInformation
Project Age (Years)
Tota
l net
ben
efit (
US$
)
0<1 1 2 3 4 5 6
2
4
6
8
10
12
Adaptation
Agribusiness Marketing and distribution
Agribusiness Agro-processing
Agribusiness Primary production
Agribusiness Input supply
Financial Services
Renewable EnergyInformation
Project Age (Years)
Tota
l net
ben
efit (
US$
)
22
The graph below illustrates the business performance
of grantees with average revenue by project age and
by sector in 2015. Financial scale gives an indication
of the strength of the business and its capacity to sus-
tain and grow operations and become profitable – and
consequently generate impact for beneficiaries. Lower
levels of revenue imply a greater reliance on the AECF
funding, especially at early stages of the project life,
even if impact generated is high.
The largest projects by revenue are within the agri-
business sectors which steadily increase in average
revenue as projects age, reflecting the broad levels of
success the AECF has had in its core business. Agro-
processing companies are generally larger from the
start of the project as these grantees tend to be well
established. Input supply companies rapidly scale and
revenue reaches a maximum in year five, reflecting
the cumulative growth of business since the start of
the large Africa Agribusiness Window. Profitability for
these companies varies significantly, with some major
contributors to the programme impact both making
substantial profits and losses during 2015. Marketing
and distribution are in general new businesses and
start small but rapidly grow to US$5m revenue by year
four – grantees here are mostly involved in cocoa and
whilst far from profitable are connected to multination-
als so medium term financial security is expected.
Renewable energy projects in the portfolio are mostly
start-ups with no initial revenue but rapidly move to
scale after the first year and generate an average
revenue of US$4m by the fourth year, the oldest that
these grantees have reached in 2015. This sector con-
Business performance in 2015
Average revenue per project, by sector and project age
Adaptation
Agribusiness Marketing and distribution
Agribusiness Agro-processing
Agribusiness Primary production
Agribusiness Input supply
Financial Services
Renewable EnergyInformation
2
4
6
8
Mill
ions
<1 1 2 3 4 5 6
Adaptation
Agribusiness Marketing and distribution
Agribusiness Agro-processing
Agribusiness Primary production
Agribusiness Input supply
Financial Services
Renewable EnergyInformation
2
4
6
8
Mill
ions
Business performance in 2015
<1 10 2 3 4 5 6
23
AECF Impact Report 2015
tains both highly successful solar and less successful
biomass projects so the average does not well reflect
the performance of the best projects that are likely to
survive into the medium term. All of the sector remains
some way from profit as upfront network investment
demands remain very high for several years.
The information sector produces some of the highest
impact projects for the AECF, but revenue remains low
as the operations of these grantees are in general small.
Information technology enables them to impact on very
large numbers of people at very low cost per person.
Projects in their sixth year in 2015 represent the earliest
of the AECF’s investments and are mainly in agribusi-
ness. Numbers are tailing off because grantees are
graduating from the monitoring process and we no lon-
ger gather their company performance data – although
we do still record impact where it is available.
Donor funds pledged to the AECF increased from US$36m at the end of 2009 to US$247m by December 2015.
“”
24
25
Impact Report 2016
The AECF’s impact over the last 8 yearsDonor funds pledged to the AECF increased from US$36m at the end of 2009 to US$247m by December 2015.
The AECF grew at an average annual rate of 70% up to 2012, with 17 competitions launched during this period.
However, only US$3m was pledged to the AECF in 2015.
The number of projects in our portfolio has grown at an average rate of 37% annually since the AECF’s inception
and totals 257 projects across 23 countries. 173 of these projects were actively managed by AECF at the end of
2015, with the remaining having finished their six year management period by AECF (though most of these remain
active businesses), been closed by the grantee or by AECF, or put on hold.
During the last eight years, the AECF has committed US$156m in repayable and non-repayable grants to the busi-
nesses implementing their projects. An additional US$426m has been committed by grantees in matching funds
in cash, in-kind contributions, and third party debt, equity or grants. This is equivalent to US$2.84 committed to
AECF-funded projects by the private sector for every US$1 committed by donors.
US$91m of these funds had been disbursed at the end of 2015, with a further US$427m provided by the grantees
to date. This represents US$4.69 actually invested or leveraged in AECF-funded projects by the private sector for
every US$1 we have provided. This high ratio of matching and third party funds committed to, and invested in, our
projects is indicative of our success in leveraging private sector investment as a means of sharing risk and maxi-
mising benefits for the rural poor.
The growth of the AECF
funds pledged
2009 2010 2011 2012 2013 2014 20150
50
100
150
200
250
300
0
50
100
150
200
250
300
2839
6790
179
208
257
36 36
47
35
59
27
40 3
83 118 176 203 244
Cumulative funding at year end
US$
Mill
ions
The growth of the AECF
Num
ber
of p
roje
cts
(all
proj
ects
)
New funding in year Projects
26
US$91M disbursed in grants and loans
Over 8,000 jobs created in AECF funded businesses, with a cumulative wage
bill of US$99M
320,000 tonnes of CO2e emissions displaced
Total net benefit of US$463M to poor
households
Over US$420M of private sector funds leveraged
257 projects funded in 23
countries
Idea announced at
Gleneagles
First country-specific
window (Zimbabwe)$25M of funds
disbursed0.5M households
reached
100 active
projects
US$50M of funds
disbursed
US$300M of cumaltive net
benefit
Formal launch at World Economic Forum—Africa
Summit Cape Town
First continent-wide competition (General Window—Early Bird)
Renewable energy and adaptation to climate
technologies window (REACT)
2005 2008 2008 2009 2010 2012 2013 2013 2013 2014
Impact Since 2008
27
AECF Impact Report 2015
The impact of our projects on poor people in sub-Saha-
ran Africa has increased exponentially since we began,
both in terms of the number of households reached and
the total net benefit to them. This steadily accelerating
growth rate is shown in the graph below. The dip in total
net benefit between 2011 and 2012 was caused by a
single input supply project in Kenya with a high aver-
age net benefit per household, which reached 100,000
fewer households in 2012 than it did in 2011 as a result
of a drought.
There are two key drivers for the AECF’s accelerating
impact at the portfolio level – the increasing number of
projects in the portfolio and the maturing and scaling of
these projects as they age. At the end of 2015, the aver-
age age of active AECF projects was 3.28 years. Given
that we measure the impact of AECF-funded projects
on an ongoing basis, we would expect the aggregate
impact of the fund at the household level to continue
increasing for at least two more years.
In total, our projects have enabled poor households to
generate US$462m of additional net benefit since 2008.
This can be added to the US$99m in net wages from
jobs created in the businesses we have funded to arrive
at the AECF’s total development impact of US$562m
since it started. We can divide this figure by the amount
invested in projects to calculate the development rate of
returniii of 6.15 - or US$6.15 of development impact for
every US$1 that we have invested to date.
The AECF’s annual impact
Our projects have enabled poor households to generate US$462m of additional income since 2008. “ ”
2009
40,230
200,925352,668 495,996
957,894 1,481,085 2,088,774
2010 2011 2012 2013 2014 2015
Households Total Net Benefit
The AECF’s impact year on year
$2,450,000
$29,487,000
$51,689,00$44,974,00
$63,501,000
$123,450,000
$153,474,000
28
US$299.6m, or 65% of the AECF’s total net benefit,
has been produced by agribusiness projects to date.
The weighting of the AECF towards agribusiness
projects is in line with the our core objective to sup-
port the growth of sub-Saharan Africa’s agricultural
and agribusiness sectors in order to generate sus-
tainable benefits for the rural poor.
A fifth of the net benefit over the last eight years has
been generated by information projects, despite only
4% of our projects being focused on this sector.
However, as is clear in the infographic below, this im-
pact was driven primarily by one project – Mediae’s
Shamba Shape Up.
Cumulative impact by sector
Total net benefit by project, by sector since inception
SectorAdaptationAgribusinessFinancial ServicesInformationRenewable Energy
Adaptation Agribusiness Financial Services Information Renewable Energy
Sector
29
AECF Impact Report 2015
Renewable energy projects have generated 8% of
the AECF’s total net benefit to date. However, this is a
relatively young area of the portfolio and we expect the
proportion of total impact generated by renewable en-
ergy to increase significantly over the coming years as
projects mature. Many poor households utilising solar
home systems provided by AECF-funded projects are
still within their “payback period”, and once they own
their systems outright the net benefit per household
from these projects will grow substantially. Less mature
is the adaptation portfolio, where projects are under
two years old on average and have had little impact
so far.
The financial services projects we have invested in have
produced 6% of the AECF’s total net benefit, despite
12% of our projects being focused on this area. As was
highlighted in the 2014 Impact Report, many of these
financial services projects have faced major challenges
in extending their reach into rural areas. In particular,
scale is essential and several of the mobile money proj-
ects we have funded have struggled to compete with
large telecom providers rolling out similar products –
companies which are not in need of AECF funds. These
businesses have the infrastructure, marketing budgets
and capacity to influence regulators and government
that are needed to provide services to very large num-
bers of customers but are too financially successful for
our funding to be sufficiently additional. Our, smaller,
beneficiaries have had problems with overcoming
regulatory and license issues, accessing software and
hardware platforms and being able to rapidly increase
to a sustainable size.
30
At the end of 2015, the AECF’s portfolio was split into eight window portfolios. As is clear from the chart be-
low, the majority of the AECF’s impact on poor households in the first four years of operation were generated
by projects in the General Window – our first competition Window, launched in 2008. As these projects have
finished in terms of their engagement with the AECF, the impact from that portfolio has decreased, although the
recovery of one large company, Western Seed, has seen a resurgence in the window’s 2015 impact.
Cumulative impact by Window
Impact by windows year on year
2009 2010 2011 2012 2013 2014 2015
The household impact delivered by the Africa Agribusiness and REACT portfolio has increased
0M
10M
20M
30M
40M
50M
60M
70M
80M
90M
100M
110M
120M
130M
140M
150M
160M
Tota
l Net
Ben
efit
Impact by windows year on year
YEAR
WindowAAWGWPCWREACTRIBSSWTZAWZIM
AAW GW PCW REACT RIB SSW ZIMTZAW
Window
The household impact delivered by the Africa Agribusiness and REACT portfolio has increased steadily since
2012. We expect the rate of impact in the REACT portfolio to continue to increase as more renewable energy proj-
ects scale up and adaptation projects move towards maturity.
2009 2010 2011 2012 2013 2014 2015Year
0M
50M
100M
150M
200M
250M
300M
350M
400M
450M
Cumulative Total Net Benefit
Window (group)AAWGWPCW & SSWREACTRIBTZAWZIM
31
AECF Impact Report 2015
Projects in the South Sudan and Post Conflict
Windows operate in extremely fragile and challeng-
ing environments. Unfortunately, the resurgence of
conflict in South Sudan has resulted in the failure
and closure of the majority of projects and a very
limited impact on poor households. Projects in
the Post Conflict Window have produced varying
impact for the rural poor as can be expected in
such operating conditions. Some very successful
projects in Somaliland and DRC have been able
to transform the lives of their beneficiaries in areas
where few other opportunities exist (see case box
on Esco Kivu on page 46). Other projects have
been constrained by the difficult environment, or
hindered by other external factors such as the
Ebola crisis in Sierra Leone and Liberia.
The Zimbabwe and Tanzania Windows are country
specific windows, and discussion of their perfor-
mance can be found in the following section on
impact by country.
We provide funding for the private sector in some of
the most difficult places in Africa, including Sierra
Leone, DRC, Somaliland and South Sudan. Operat-
ing in these environments requires both flexibility
and patience as companies generally take longer
to implement their projects and frequently have
to change their approaches. Our three remaining
companies operating in South Sudan for example
are facing post conflict instability, currency devalua-
tion and drought and all have moved away from their
initial plans to engage in other activities that will at
least keep their enterprises afloat. One of these three
is still providing significant development impact from
its new business model of selling seeds to aid agen-
cies for distribution to smallholders. Our companies
in Sierra Leone were just beginning implementation
when Ebola struck. One became a key supplier of
food to aid agencies within the quarantine zone. With
the passing of the epidemic, all of our enterprises are
re-engaging on their initial project objectives. Despite
these challenges, only two of 20 contracted projects
in these post conflict environments have failed.
The AECF in difficult places
Photo Credit: Esco Kivu
32
Although we have funded projects in 23 different
countries since 2008, our impact on the rural poor
has been concentrated in a few of these countries (as
shown in the map to the right). Indeed, 69% of the
total net benefit generated by AECF-funded projects
over the last eight years has been in Kenya, Tanzania
and Zimbabwe.
47% of our total net benefit over the last eight years
has been generated in Kenya, which hosts one fifth
of the projects that have been funded. This is partially
explained by the business and political environment
being less challenging than other countries in which
we work, such as Zimbabwe, South Sudan and DRC.
Comparatively well-developed factor markets in
financial services and agricultural information, as well
as a nationwide infrastructure network, have enabled
many of the Kenyan projects to scale up, become
commercially sustainable, and have significant im-
pact on the rural poor. Although Kenya does not have
a specific country window, it benefits disproportion-
ately from some funds such as REACT and its gener-
ally more developed business environment enables
Kenya business applicants to be more successful in
writing winning applications for AECF financing.
AECF-funded projects in Tanzania and Zimbabwe
have generated 12% and 10% of the cumulative net
benefit since 2008 respectively. Both countries have
dedicated country windows as well as associated
technical support.
Up to US $1 Million Total Net Benefit
US $1 - 5 Million Total Net Benefit
US $5 - 10 Million Total Net Benefit
US $10 - 20 Million Total Net Benefit
US $20 - 50 Million Total Net Benefit
US $50 - 100 Million Total Net Benefit
US $100 - 250 Million Total Net Benefit
Impact by region and country since 2008
33
AECF Impact Report 2015
The Tanzania Agribusiness Window has a specific
mandate to support the development of small
businesses, and therefore has funded a higher
proportion of small and medium size businesses
whose projects have not yet scaled. Projects in
Zimbabwe have been severely constrained by
the difficult economic environment in the country
since the hyperinflation crisis and the dollarization
of the economy.
Projects in the Horn of Africa region have also
had a substantial impact on poor households.
This was due principally to the Post Conflict Win-
dow funding that targeted this region and which
contained several high impact projects, as well
as the very successful AgFlow Poultry project in
Ethiopia (see case box on page 64) funded under
AAW.
Photo Credit: Esco Kivu
34
8,000 salaried jobs have been created and maintained in AECF-funded businesses since 2008, generating
a cumulative net wage bill of US$99m. These roles are substantially in manual labour at the field or factory
worker level, but also includes some more professional grades such as extension officer or farm manager
positions. This is supported by the average annual salary for a job created in projects we have funded of
US$3,649. We estimate that more than 85% of jobs created as a result of AECF support have been at
worker level, which is maximising the impact on rural households.
The AECF’s impact on job creation
Jobs created and net wage bill since inception
The ratio of men to women in jobs created or maintained in our projects in 2015 was 1.6:1. Fewer women are
employed by the businesses implementing these projects as the majority of formal jobs in rural areas are still
taken by men. Despite this, the number of women employed by businesses we have funded has increased
since 2014, from 34% to 38%.
1,565,4023,092,853
6,886,8259,928,362
17,928,849
26,254,529
33,044,862
The AECF’s impact year on year
869
2,008
2,6842,927
5,612
4,893
8,061
US$ Net Wage Bill Jobs Created
35
AECF Impact Report 2015
Average number of jobs created per project per sector (all active projects)
Sub-Saharan Africa is facing a youth population bulge as still high fertility rates lag reductions in infant mortality,
with close to 70% of the continent’s population under the age of 30iv. By 2022, the proportion of the popula-
tion between the ages of 15 and 29 could reach 28% . This burgeoning youth population could become a de-
mographic dividend if sufficient productive employment is created, but equally could result in fragmented and
unstable societies if there are insufficient jobsv. With 65% of jobs in the AECF funded projects taken by those
under 35, the AECF is playing its role in providing productive employment for young people in the region.
As is clear from the graph below, the average number of jobs created per project varies considerably by
sector. Renewable energy projects have employed over twice as many staff as projects in other sectors on
average. This is driven by PAYGO solar companies, who employ large numbers people to service their rural
distribution networks. Other projects which provide goods or services for consumption by the rural poor, such
as those focused on financial services and input supply, are less labour intensive and therefore do not employ
as significant numbers of workers.
35%Over 35
Under 35 65%
33%Part-time
Full-time67%
38%Female
Male62%
0
20
40
60
80
100
120
140
160
Average number of jobs created per project per sector (all active projects)
Adaptation Agribusiness Marketing and distribution Information
Agribusiness Agro-processing Agribusiness Primary production Renewable Energy
Agribusiness Input supply Financial Services
41
52
32
53 50
24 23
136
36
Jobs are central to fostering inclusive growth in de-
veloping countries, and the creation of jobs is neces-
sary to boost living standards, raise productivity, and
foster social cohesion. Yet pervasive underemploy-
ment is characteristic of rural sub-Saharan Africa,
with millions of households who are engaged in infor-
mal agricultural work earning enough to subsist but
not lift themselves out of poverty. In addition, there
are also 10 million entrants per year to the labour
force, driven by a burgeoning youth population.
Better, more productive jobs that allow people to earn
higher incomes and provide a sense of purpose and
self-worth are therefore needed. Challenge funds
operating in the private sector development space
have the potential to create a substantial number of
jobs, both in the businesses that they directly fund
and along these businesses’ value chains.
However, the way in which we measure development
impact across the AECF portfolio results in mod-
est job creation numbers. This is because improved
livelihoods for the rural poor as a result of selling
commodities to AECF projects, or consuming the
products they produced, are measured as increased
household income rather than new jobs created.
Indeed, the 8,000 jobs that have been directly cre-
ated by businesses that we have funded since 2008
generate only 17% of our cumulative development
impact. While the creation of jobs is an important fea-
ture of the AECF, the fund has played a much larger
role in stimulating rural incomes of farm households.
The AECF’s role in creating opportunities for decent work
37
AECF Impact Report 2015
SeedCo is an AECF-funded project in Tanzania which
develops and markets certified crop seeds. In 2015,
SeedCo’s hybrid maize seeds have been used by
67,193 households to increase their maize yields.
Each household benefited by US$50.36 on average
from increased yields once additional costs of seed,
fertilizer and pesticide costs were subtracted, giving
the project a total net benefit of US$3,383,799. This
was based on an average increase in yield of 314kg
on an average farm size of 1.2 acres.
Improved crop yields are an example of an increase
in marginal productivity which can push smallholder
farmers and their families further above subsistence
levels and the poverty line, therefore going some way
to address the issue of underemployment. Instead
of reporting this as benefit per households, we could
equally aggregate the benefit and convert it into the
following jobs figures:
Average yield per hour for smallholder maize
farmer in Tanzaniavi = 1.6kg per hour
314kg ÷ 1.6kg per hour = 196.25 hours or 24.53 FTE
days (assuming 8 working hours per day)
24.53 × 67,193 = 1,648,328 FTE days
1,648,328 FTE days ÷ 240 days per year =
6,868 FTE jobs created
Addressing underemployment in Tanzania: SeedCo
Yet the impact our projects have had on improving
smallholder productivity through provision of better
inputs, or enabling the expansion of smallholder farm
enterprises by acting as a guaranteed buyer, moves
beneficiaries from under employment closer to full
employment. Indeed, outgrower projects such as
Esco Kivu (see case study on page 46) have cre-
ated jobs directly and indirectly in areas where there
were few opportunities previously, transforming the
entire employment environment in the area. Further-
more, the provision of training in farm management
or financial literacy conceptually shifts something
that is done for subsistence into a profession. In the
future, the AECF will look to convert our development
impact figures into the equivalent jobs created by
valuing the additional output or income in the form of
number of jobs rather than value of income.
There are a number of methodological approaches
to this and we intend to explore them more com-
prehensively in a learning paper during 2016. As an
example, the case study to the right converts the
increased household income generated by a single
AECF project into a jobs figure by estimating the ad-
ditional full time equivalent (FTE) hours worked on the
farm as the result of an increase in yield.
38
We have learned from our mistakes and built on our successes to improve the process of identifying commercially viable projects that target the needs of the rural poor.
“”
39
AECF Impact Report 2015
The AECF at Eight - what has been learned from managing the AECFIn the eight years since we began developing the
first competitions, the AECF has learned from our
mistakes and built on our successes to improve
the process of identifying commercially viable
projects that target the needs of the rural poor.
We have been successful in identifying business-
es across a wide range of technical areas and
with a broad geographic scope, utilising a variety
of competition designs to challenge the market
to develop novel and innovative solutions. In this
chapter we look at how we have implemented the
process of competitions, grant management, and
results measurement, what changes we identi-
fied and adopted along the way to improve how
we spend and manage donor funds and what this
means in terms of efficiency and value for money.
We highlight some of the experiences that we
have gained, from how projects have targeted
market systems to what types of projects do best
and why. Finally, where relevant, we identify those
areas where we could do things better.
The remainder of the report considers the AECF
core concepts and how it affected market sys-
tems; some key tools we use; and finally an
elaboration of processes and experiences from
implementation. We also look at how we affected
sectors of seeds and poultry, how we deal with
the increasingly important issue of gender and
wider public benefits from renewable energy
investments.
40
FINANCIAL SERVICES
ECONOMIC GOVERNANCE
INFRASTRUCTUREACCESS TO INFORMATION
BUSINESS ASSOCIATIONS
SUPPLY CHAIN
REGULATORY REGIME
Changes in factor markets: this refers to shifts in the availability of land, labour, capital, �nancial services, and information as a result of the AECF project e.g. land prices increase or access to �nance becomes more widespread.
Crowding in: Other businesses have entered a sector or value chain as a result of the improved incentives and business environment created by the AECF project.
Copying of the business model by other businesses: Replication of the grantee’s business model by other businesses or investors. Successful businesses, by their very nature, have a demonstration e�ect on others. Whilst this is likely to have a larger impact in more volatile markets there will be some systemic impact in any market – particularly from projects of a su�cient scale. Naturally, the private sector would like to crowd-out the competition by creating a monopoly situation while, in contrast, the AECF is interested in business model replication across sectors and geography.
Copying successful practice: Other rural households not engaged with the AECF project copy or adopt project behaviours or technologies as a result of seeing project bene�ciaries improved livelihoods.
Adapted from: Spring�eld Centre for Business Development
Changes in the business regulatory environment: Changes in laws and regulations, or implementation of laws and regulations as a result of the AECF project. Rather than being risk averse and avoiding business ideas that may struggle to get legal and regulatory approval, the AECF may decide to deliberately select such business ideas based on the logic that (a) the regulations/regulatory process in question is considered to be holding back investment and growth of a sector and (b) where the prospects of changing the approval process seem reasonable.
Core market:Supply and
demand
One of strategic purposes of the AECF is to improve the way agricultural and other market systems work,
thereby facilitating market entry for rural poor households and businesses. Some Challenge Fund mecha-
nisms intended to disburse donor funds efficiently and effectively to the private sector are limited in their
ability in being to generate wider impact on market systems. It has been important to adapt the AECF to
achieve this purpose. We also recognise that the size of the AECF means market systems change is often
limited to the local economic environment
Core concepts – market systems impact, additionality and innovationThe AECF as a mechanism for inducing market systems change
41
AECF Impact Report 2015
Over the past eight years, the AECF has identified the
types of business ideas that are most likely to lead to
systemic change, to run competitions which challenge
the market to develop these ideas, and then manage the
performance of our grantees to ensure that they deliver.
We identify here a number of key factors that contribute
to inducing market systems change.
Selecting business ideas that have the greatest potential for market systems change
Focus on innovation and commercial potential:
Evidence of commercial viability drives investment and
growth, which are essential for sustaining business
models. Innovation is a key indicator of systemic change
potential: a business that is simply doing more of the
same will be unlikely to change the way others operate,
while the introduction of a new technology or business
model will, if successful, force others to adapt to remain
competitive. The key here is to recognise when an in-
novation could be or has been genuinely ‘disruptive’ and
will actually affect the way others in the market behave.
Selecting enterprises which have a potential to
impact on other businesses: Certain types of business
activity have a greater potential to impact on other busi-
nesses. Those enterprises working to provide services
to other businesses are more likely, intuitively, to affect
other businesses and thereby have an impact on the
market system. There has been greater market systems
impact from businesses which deliver financial services,
agricultural input supplies, information and media when
compared to those focused on smallholder out-growing
or manufacturing.
Selecting business ideas that have the potential to
be copied and replicated: The private sector naturally
crowds out competition and creates unique competitive
advantage, whilst in contrast, the AECF looks to crowd
in others and replicate business ideas across sectors
and geographical regions. We have specifically avoided
supporting one player in a market where this may have a
distorting effect on competition.
It also means that we try and support ‘open platforms’
that encourage a variety of players to compete as op-
posed to single user systems. An area where this is par-
ticularly relevant is in information technology and mobile
banking services.
Targeting businesses that face legal and regulatory
constraints: The AECF actively supports enterprises
at the early stage of development, including those for
whom regulatory approvals are either challenging or
which have not yet been granted. These projects may
offer potentially good impact but will struggle to attract
the financial support necessary to sustain them until
the regulatory hurdles have been overcome. Regulatory
delays affecting one company may be affecting a sector
as a whole and by supporting one player to overcome
a regulatory barrier we can bring sector wide improve-
ments to the regulatory ecosystem. For example, we
specifically funded three companies in Kenya all press-
ing for Pest Controls Products Board approval, of which
two of the three were approved. Although the product of
the third company was not approved, this led to the sub-
sequent development of a successful seed treatment.
Cluster financing business ideas in the same sec-
tor or region: From the outset we recognised that the
AECF should be in the business of ‘starting races’ and
not ‘picking winners’. The hypothesis was that by select-
ing a number of business ideas from the same sector or
region, the AECF would be able promote competition,
trigger innovation and induce market system change.
Our biggest success story has been contributing to the
development of a competitive market in PAYGO solar
products, but we have also actively funded clusters of
seed, poultry and biomass projects.
42
Holding more focused competitions
Competitions limited to sub-sector or geographies: Country based competitions for Zimbabwe, Tanzania
and South Sudan have been designed to address the specific market system issues faced by businesses in
these very different countries.
Competitions designed to solve a particular problem: Whilst the geographical funds address specific
country level issues, we have also designed competitions to address particular market challenges. Our Re-
search into Business Window addressed the challenge of commercializing ready-for-market technologies and
products that were “stuck” in research stations. We also used competitions to more effectively target specific
project environment, such as the Post Conflict Window. Our experiences from PCW suggest that the potential
for wider systemic impacts from investments is high as we are frequently supporting the first investors moving
in after conflict and additionality is often stronger than elsewhere.
43
AECF Impact Report 2015
Managing, learning and linking
Working closely with grantees to identify and ad-
dress market system challenges: Businesses often
find challenges in understanding the information we
are seeking on defining market systems change. We
worked with each business to identify one or two key
strategic issues with systemic change potential and
then agreed a budget with the grantee to allow them to
work on these issues.
Knowledge management and learning: The AECF
was initially limited in its aspirations for learning but
this has changed over the years. Dissemination of this
learning, such as through this report, is now a corner-
stone of our business. We have recognised the poten-
tial for business to business learning platforms for our
grantees and also provide an annual event to facilitate
this. Although in some cases grantee businesses com-
pete with each other, they have found areas of common
interest in technical, operational and regulatory areas.
The poultry sector is a good example which is dis-
cussed also elsewhere in the report.
Developing appropriate links and handing over to
others: As suggested above, the AECF has a role to
play in taking systemic constraints from the grantees
to those better placed to deal with the e.g. legal and
regulatory issues. In addition to linking grantees opera-
tionally, the AECF has recognised that many need help
to transition from subsidised financing to more com-
mercial funding in order to effect and sustain market
system change. As part of this, we have developed the
AECF Connect, where graduates of the main AECF
operational windows are connected with venture capital
and other commercial sources of funding. See below
for further information on AECF Connect.
We monitor annually whether our projects are im-
pacting on the five categories of market systems out-
lined above. The following chart illustrates how many
times each are mentioned in our monitoring reports:
Are our projects making changes to market systems?
Systemic Change Types
0 10 20 30 40 50 60 70
# of observations made
Copying of theBusiness Model
Crowding In
CopyingSuccessful
Practice
BusinessRegulatory
Environment
Factor andOther Markets
44
We noted above that market systems change, focused around our five categories, was often difficult
to both define and achieve especially on a broader scale. Here we provide an analysis of the systemic
change that has been achieved at a more localised level, through our operations in Zimbabwe.
In Zimbabwe, the AECF aims “to contribute to the rehabilitation and regeneration of the...market sys-
tems...” by investing across a broad range of agricultural sub-sectors and other support sectors, with
priority given to provision of financial services to the poor. 13 of the 21 grantees analysed were sufficiently
successful to generate 16 systemic changes, of which six were predicted and ten were unplanned. Only
one, Profeeds contributed substantially to change in the poultry sector. The table below shows the five
types of systemic change for AECF grantees – firstly those predicted in the project design documents
and subsequently those actually observed. Only six of the 42 predicted outcomes actually materialised, il-
lustrating the difficulties in generating market system change with relatively limited funding focused at the
company rather than the sector level.
Supporting market systems change - an example from Zimbabwe
Copying of business model by other businesses
Although 12 out of the 21 grantees analysed predicted that their business model would be copied, this
occurred in two only cases, both grantees involved in the poultry sector. There are a range of reasons why
other business models have not been copied including that the model itself was copied from other compa-
nies, it was not successful, the barriers to entry were too high or that competitors has already developed
better business models
# of grantees predicting changevs.
# of business models for which change has been observed
0
2
4
6
8
10
12
14
Copying of theBusiness Model
Crowding In CopyingSuccessfulPractice
RegulatoryFactor markets
Predicted Observed Predicted & Observed
Number of grantees predicting change vs number of business models for which change has been observed
# of grantees predicting changevs.
# of business models for which change has been observed
0
2
4
6
8
10
12
14
Copying of theBusiness Model
Crowding In CopyingSuccessfulPractice
RegulatoryFactor markets
Predicted Observed Predicted & Observed
45
AECF Impact Report 2015
Crowding in of other businesses into the value chain
This is the most successful systemic change, with six grantees having crowded in other companies. It is important to dis-
tinguish between crowding in that is inherent to a grantee’s business model (e.g. CABS crowding in a remittance company
for its mobile platform), and crowding in that results from the model crowding in of other businesses into the value chain.
Only the latter has been considered. The smaller businesses (revenues of less than US$900,000) have been most suc-
cessful in crowding in other businesses.
Copying of successful smallholder practice
Copying of successful practice occurred in the case of three grantees, all involved in the poultry sector. Profeeds’
business model has transformed small-scale poultry production, with a rapidly increasing number of farmers having
switched to exotic breeds and fixed feeding programmes. In the case of Yelo Egg, there is some copying of its produc-
tion model by neighbouring farmers in the limited geographical areas where it is active. With Sondelani, the copying is
not related to the original business model (tomato processing) but to its small scale broiler contracting scheme, on which
Sable’s production model is based.
Successful practice implies a successful business model, although in the case of financial services, copying is directly
correlated with market growth, i.e. more consumers using the services. In addition, when beneficiaries are producers,
high levels of input costs, and in some cases investment, often preclude copying. When they are consumers, successful
practice can only be copied if the supplier offers the beneficiary training, as well as a competitive advantage, such as is
the case with Profeeds.
Changes in the business and regulatory environment
Predictions for changes in the business and regulatory environment were modest, made by only two grantees. Although
there have been many other changes in the business and regulatory environment, both positive and negative, only two
grantees have meaningfully contributed. Yelo Egg successfully lobbied for the removal of VAT on live chicken sales
through the Zimbabwe Poultry Association, thereby contributing to a reduction in production costs. While not predicted,
TAMI contributed to regulations for weather-indexed insurance.
Changes in factor markets (primarily land, infrastructure, finance and information)
Nine companies predicted changes in factor markets, of which five predicted improved access to rural finance. This has
not happened, apart from improved access to mobile financial services which is not attributable to the AECF, but due in
large part to the external economic conditions prevailing in the country. The other four companies predicted improved
access to infrastructure, of which two were inherent to the business model and one lacks a clear attribution pathway.
Although not predicted, Profeeds and the numerous competitors that have copied its business model have substantially
contributed to the revival of rural retail centres.
This summary is generated from a more comprehensive learning study on systemic change in Zimbabwe which will be
publicly available on the AECF website in late 2016.
46
The AECF seeks to place its funds in challenging
environments where financial resources are scarce
or expensive, in difficult sectors that are unappealing
to investors or at early stages in product or company
development where technologies need to be proven
to attract further development funds. We seek to sup-
port activities and generate results that are additional
to what the recipient would have achieved anyway.
Grantees need to be able to answer the question:
why do you need the AECF funding and what would
you do without the AECF support?
Input additionality is defined as the resources provid-
ed which are in addition to what the recipient could
provide from its own funds or from other sources of
commercial or donor finance. Development addition-
ality looks at what outcomes and impacts the project
achieved with the AECF funds over and above what
they would have achieved without.
Investing public funds into the private sector risks
crowding out other forms of funding that, whilst more
expensive, represent a source of long term capital
that business models need to be able to access to be
sustainable. To ensure that we do not compete with
these sources, we allocate funding through com-
petitions which require applicants to show both the
availability of alternative resources and what addi-
tional benefit they will provide for the rural poor by the
end of the project which they could not provide with
commercial finance. We test this by visiting potential
grantees and interrogating their proposed business
models prior to awarding grants, in order to ensure
that we are balancing taking risks with generating
development impact returns for our donors.
Since 2000, Esco Kivu has been promoting the culti-
vation of cocoa to smallholders as an alternative cash
crop to coffee which was decimated by disease. Its
area of operations in Eastern DRC saw armed conflict
during 2013 with widespread displacement of people
and destruction of property. Although most people
have returned, road travel between this area and the
company processing facilities in Beni remains dan-
gerous with armed groups active throughout the area
and some regions still considered inaccessible. Esco
Kivu is the only sizeable buyer in the region with large
numbers of smallholders relying on it for their sole
source of cash income.
The AECF provided funds to develop a factory in
Nobili near to the Ugandan border, create additional
collection centres throughout the region and expand
the storage facilities in Beni itself. AECF funding
de-risked the investment decision for Esco Kivu,
who would otherwise not have been able to com-
mit funding to the conflict region. Without adequate
buying capacity, smallholders would rapidly abandon
cocoa production and lose substantial investments.
The AECF investment allowed Esco Kivu to buy an
additional 4,656 tonnes of cocoa from 26,102 house-
holds in 2015 and generate an additional US6.7m of
development impact for smallholder farmers. With all
facilities coming on stream for the 2016 season, we
anticipate even higher benefit for poor households in
the future.
Conflict Mitigation through cocoa in Eastern DRC
Additionality
47
AECF Impact Report 2015
Conflict Mitigation through cocoa in Eastern DRC Provides funds where no
others are available or accessible
Generates benefit that otherwise would not be
delivered
PROJECT
INPUTADDITIONALITY
DEVELOPMENTADDITIONALITY
BIGGER
FAST
ER
MOREINCLUSIVE
WID
ER
SCOPE
AECF financing provides additionality where risk and cost
make accessing the private capital markets impossible.
We identify, target and track both input and development
additionality throughout the project life cycle but principally
during the project selection phase.
We capture information, select projects and measure their
performance through qualitative information around four
principles of development additionality:
Faster – the company could be expected to make the
investment from other sources but not for several years,
meaning development impact is lost
Bigger – the company could be expected to make the in-
vestment from other sources but it would not be as large and
supporting the scaling multiplies the development impact
that can be generated
More inclusive – the company will be able to access people
closer to the bottom of the pyramid than it would otherwise
do, enhancing the benefit to very poor people. Poor people
tend to be difficult and expensive to reach, requiring physi-
cal networks, smaller packages of goods, longer repayment
terms or greater payment default
Wider scope - the company could be expected to make the
investment from other sources but AECF resources will en-
able it to expand the scope of the good or service to multiply
the development impact.
Over the past eight years we have provided systems for
tracking development additionality in an effort to capture
where and how we benefit places or people who would not
have otherwise been reached. This is principally qualitative
in nature as development additionality cannot be accu-
rately measured quantitatively and falls broadly in line with
DCEDVii (see page 59 for more on DECD) criteria for reliably
assessing additionality. Our current approach is to identify
additionalities within individual projects during the annual
site visit process, but this does not allow us to realisti-
cally consolidate findings on additionality at the Window or
Portfolio level. More research is planned during 2016 on the
different kinds of additionality, how they are generated by
different types of project and the extent to which the benefit
accrues to the grantee and the rural poor, both directly and
indirectly. The objective is to determine which projects are
most additional for the rural poor to improve the targeting
of future funding. There are clear dangers in retrospective
assessments of additionality, especially from a third party
perspective where full information of the complex prevailing
conditions at the time of contracting is rarely available.
With a minimum AECF project size of US$250,000 and maxi-
mum US$1.5m for most Windows, we focus funding on me-
dium and large companies. This raises the question whether
our funding is additional or whether the grantee itself could
have provided the funds themselves. A good example is the
funding of cocoa buyer Esco Kivo in DRC (see box on page
46). Looking back at the success of this business, one could
assume that our funding was not additional as they could
have self-funded the infrastructure investments. However,
given the political and economic conditions prevailing in
2013 they would not have done so in the near term and many
thousands of households would have missed out on addi-
tional income.
48
How do we select for innovation?
The AECF’s objective is ‘funding innovation in Africa’
and this is an important focus for our competitions.
We seek to fund new ideas in traditional sectors, new
ideas in new sectors and both new and existing ideas
in new regions – all of which should improve the lives
of the rural poor. Individual windows and the competi-
tions within those windows either leave applicants to
propose innovative solutions to general problems or
target specific areas of innovation. These are deter-
mined, in some instances, by the lessons that we have
learned from our implementation of earlier competi-
tions or as a natural evolution from them. For example,
PAYGO solar projects funded under REACT Rounds 1
and 2 are considered innovative under Round 3 only
if they are being expanded to reach the ‘base of the
pyramid’ or to new geographical areas. Innovation
is also assessed in relation to supporting the policy
objectives of AECF’s funders. For example, REACT
Round 3 sought companies with innovative approach-
es to climate change adaptation in arid and semi arid
areas of Kenya in support of the policy objectives of
DFID, one of the funders of this competition.
We prioritise innovation in competitions by allocating
a score during the application process. This is then
applied as a criterion for selection together with other
criteria which include, for example, capacity to imple-
ment, reach to the rural poor and additionality. Weight-
ings applied to different criteria are adjusted according
to the context and objectives of the competion. For
innovation, this proportion is normally in the order of 20-
30%, but ranges down to 0% for some windows such
as Post Conflict where all investments are considered
innovative because of the nascent condition of the local
economic environment. It is generally higher in conti-
nent wide competitions where we are seeking the ‘best
of the best’ and lower in smaller, regional or country,
competitions where innovation is likely to be lower
and other objectives are also important. Scoring leads
to a shortlisting. Final selection is undertaken by an
independent Investment Committee based on, in part,
a business plan that includes a more comprehensive
elaboration of the innovative nature of the project.
How innovative are we?
We score projects at the contracting stage based on a
seven point ranking
Almost 90% of the portfolio is either very or highly in-
novative. Over 80% of projects are either new for the
company in Africa or worldwide or new for the country
where they will take place. 15 projects, or around 7%
of the portfolio, are rated at 5 or 6 on this scale and
can be considered highly innovative. This includes four
projects that are introducing a new technology globally
and a further eleven where the project is new for the
sector in Africa.
At the other end of the scale, a similar proportion (23
projects or 10% of the portfolio) are either not innova-
tive at all – four projects – or score 1 on our innovation
scale. The four projects that are not considered in-
novative have other benefits of additionality in the local
economic space that justifies their inclusion.
Innovation
Innovation is the market introduction of a technical or organisational novelty, not just its invention
- Joseph Schumpeter
“”
0 Project is not considered innovative
1Project is new for the company in the country of implementation
2 Project is new for the company in Africa
3 Project is new for the company globally
4 Project is new for the country in which it will take place
5 Project is new for the sector in Africa
6 Project is new globally (a world first)
49
AECF Impact Report 2015
Intuitively, we would expect that more inno-
vative projects would have a greater failure
rate and those that are less innovative would
be more likely to succeed. Three of the four
global firsts funded by the AECF failed, but
in only one of these cases was this because
of problems with the business model. 40%
of the projects in category 5 and 6 of our in-
novation ranking scale performed as expected
or better than originally intended, with half
of these projects in the area of PAYGO solar
energy systems. Clearly, this is an innovation
that works (see page 57 for an overview of
how we funded several projects in this sec-
tor to promote competition). In 2015 60% of
projects scoring high on the innovation scale
had either failed or were performing below
the levels expected when they were con-
tracted. These projects covered a range of
activities and Windows and failed mainly due
to external reasons – inability to change the
regulatory environment, illegal competition or
security issues.
At the other end of the scale are those projects which
are not particularly innovative. We could expect that
these, as they implement known technologies with per-
haps some local variations, should be in the most part
successful. Of the 22 projects included in the 0 and 1
categories of innovation, a surprisingly high proportion of
55% either failed or were performing less than expected.
Two thirds of these projects were in Zimbabwe and again
usually failed due to external factors including the lack of
a compliant economic and regulatory environment and
drought. Only 9% of the low innovation projects exceed-
ed expectations – Western Seeds and Tanga Fresh – but
these were both very successful in 2015. Of the less-
innovative projects, 75% were performing as expected.
The performance of projects has been considered here
as a snap shot in 2015, with projects of different ages
and facing challenges that take differing timescales to
resolve. It is therefore possible that many of the projects
currently not performing as well as expected will improve
as they come to scale or constraints are overcome. Un-
surprisingly, highly innovative projects are less success-
ful than non-innovative, but projects of either high or low
innovation face challenging implementing environments
and have broadly equal chances of success.
Do innovative projects work?
Failed
Slower/less than expected
As expected
Exceeded expectations
20%
20%40%
36%
23%
32%
9%20%
High Innovation Low Innovation
Failed
Slower/less than expected
As expected
Exceeded expectations
20%
20%40%
36%
23%
32%
9%20%
High Innovation Low Innovation
Failed
Slower/less than expected
As expected
Exceeded expectations
20%
20%40%
36%
23%
32%
9%20%
High Innovation Low Innovation
50
51
AECF Impact Report 2015
Challenge funds operating in the private sector space have
been used to target a broad range of objectives: funding inno-
vative business ideas which catalyse market systems change,
providing risk capital where others will not, or as a feeder fund
for impact and commercial investors. The type of fund de-
termines the most appropriate financial instruments brought
into play. The AECF primarily seeks increased income and
better access to markets for rural households in sub-Saharan
Africa, and initially used a competition mechanism to provide
grants and loans for projects focused on agriculture and rural
finance. Providing funds through returnable capital as well
as grants has clear benefits for challenge funds, enabling
resources to be recycled to invest in new projects and used to
finance fund operations have worked.
Whilst the objectives of the AECF have not changed since
its inception, its growth and evolution has led it to become a
competition platform to identify business ideas in a broader
range of sectors, a feeder fund for commercial investors and
a provider of risk capital for over 200 projects in 23 countries.
Key tools for success
Grants and loans
Grants – non-repayable cash awards
provided in staged payments against
contractually mandated performance tar-
gets and contribution of matching fund,
or co-finance.
Repayable grants, or no-interest
loans – interest free repayable cash
awards secured on the grantee busi-
ness assets becoming due either on a
fixed timetable following a grace period,
or once mutually agreed project perfor-
mance targets begin to be met.
52
In order to ensure the additionality of our funding, we
target companies who are unable to access commer-
cial finance because financial returns are too low or the
business idea is at an early stage. Loans to these en-
terprises inevitably have higher repayment difficulties.
Grants, in some cases mixed with soft loans, encour-
age businesses to take more risks and innovate, puts
less stress on businesses’ finance, allows the firms to
raise more debt on the back of the grant and makes the
donor funds truly additional. Providing grants means
that companies can commit greater levels of matching
funding to the project rather than having to preserve
cash to repay loans.
Successful businesses often face cash flow problems
just when loans become due, leading to pressure to re-
schedule payments and enable grantees to use these
funds to leverage commercial capital. A requirement to
repay the principal which applies to returnable grants,
rather than just continue to pay interest, can limit devel-
opment impact when repayments become due when
business related trigger points are reached. Non-re-
course loans for which repayments are based can pro-
vide a perverse incentive for companies not to achieve,
or not to report progress against targets, as these will
trigger repayments. It is for this reason the AECF loans
are no longer linked to grantee performance.
The challenge for the AECF is to find those private sec-
tor solutions that generate impact for the poor, have
longer term potential for financial sustainability yet
which cannot find funds from other sources. Although
the AECF continues to offer loans we have also devel-
oped other approaches. We have opened specific win-
dows that provide grant only assistance – such as the
Post Conflict Window - and we have established AECF
Connect, which links former grantees with opportuni-
ties for commercial finance. In future, AECF will actively
work to develop financing solutions that are consistent
with its objectives.
53
AECF Impact Report 2015
Sharing risk with our grantees and other investorsThe AECF has always had a requirement for recipients of funding to share project risk by contributing financially
at least as much as the AECF provides, either from their own money or from other sources of grant, debt or equity
investments that they raise. Having ‘skin in the game’ is important in any development or private investment context
as it ensures ownership and stimulates performance.
At the beginning, only readily available cash assets that could be committed into the project were considered as
matched funding. As the AECF grew and the range of grantees increased, this became more difficult to manage as
the verification process became increasingly long and cumbersome. In the African investment context, and par-
ticularly in the agribusiness sector, financial mechanisms readily available in higher-income countries are not easy
for businesses to access. Bank debt and third party loans are difficult to obtain and expensive and grantees rely on
bank overdrafts, supplier credit and other mechanisms. Funding availability varies throughout the year depending on
the agricultural seasonality.
To address this, in 2012 we broadened the scope of what could be considered as matching funds to include existing
investments, land and equipment being used by the project and reinvested profits as well as more formal bank and
third party credit facilities. This has made it easier for grantees to provide matching funds, but has not eliminated the
process of verification.
We currently measure all of the matching funds brought into the business from either their own sources or third
parties for the first three years of the project lifecycle. Beyond this point, whilst development impact is recorded we
have not, so far, gathered information on additional funding that the grantee brings into the business. In some cases
this can be significant, with a number of grantees generating subsequent external investment of more than US$10m.
In 2015, the levels of matching and third party funds provided to ongoing projects by sector (as illustrated in the
graph above) were more than double the amount provided by the AECF.
$17M $17M $17M
$5M $5M
$89M
$118M
$101M
$16M$21M
$78M
$14M
$6M
$32M
$49M
Adaptation Agribusiness Financial Services Information Renewable Energy
Total AECF funds 3rd party funding Matched funding
$17M $17M $17M
$5M $5M
$89M
$118M
$101M
$16M$21M
$78M
$14M
$6M
$32M
$49M
Adaptation Agribusiness Financial Services Information Renewable Energy
Total AECF funds 3rd party funding Matched funding
$17M $17M $17M
$5M $5M
$89M
$118M
$101M
$16M$21M
$78M
$14M
$6M
$32M
$49M
Adaptation Agribusiness Financial Services Information Renewable Energy
Total AECF funds 3rd party funding Matched funding
$17M $17M $17M
$5M $5M
$89M
$118M
$101M
$16M$21M
$78M
$14M
$6M
$32M
$49M
Adaptation Agribusiness Financial Services Information Renewable Energy
Total AECF funds 3rd party funding Matched funding
54
Once grantees have completed their AECF funded projects, we continue providing technical support to enable them to identify new sources of more com-mercial capital. AECF Connect - funded by SIDA - has been a pilot initiative to support AECF grantees in raising capital from investors and lenders to ex-tend project impact by ensuring continued financial support from other investors.
AECF Connect not only finds investors and matches funders to grantees, but also aims to help business-es scale up by providing expert advice and strategic input surrounding the fundraising process. It ar-ranges fundraising workshops that bring together investors and grantee companies. AECF Connect enhances the AECF’s position as a feeder fund for other investors, by not only providing capital to initi-ate projects but also leveraging more private sector capital into these projects over time. This activity allows the AECF to demonstrate an increased return on its grant programme.
AECF Connect leveraged support of US$6.53m by the end of 2015 with a total of US$16.2m expected to be finalised by mid-2016 for nine AECF portfolio companies – including taking many through a num-ber of funding rounds. In offering this support, AECF Connect delivered a range of services from provid-ing a fundraising toolkit and investor introductions to a more active support through the entire fundraising process.
The goal of truly having scale across Africa can only be achieved by working in partnership with other investors, ensuring that the AECF selects business likely to be of interest to them and helping projects in the portfolio connect with these investors in a meaningful way.
AECF Connect as currently designed is a pilot project with modest resourcing and a narrow scope of capabilities. Whilst its effect on the companies with which it has worked has been significant, its impact has been narrow when considering the size of the portfolio. To have a portfolio wide effect thought should be given to increasing the amount of resources and the breadth of services offered to help companies prepare better for the fundraising process, seek other sources of finance and mitigate weaknesses in their businesses where possible.
AECF Connect: Supporting the transition to commercial funding
Impact Investment: Barriers still exist
Though the impact investment market in Africa is maturing,
there still exists significant untapped potential. AECF has
been filling the gaps that exist with different products but
much still remains to be done.
Awareness around impact investment – AECF grantees
are often unaware of the large pool of impact investors that
can provide capital aligned to their needs. On the other
hand, impact investors find it difficult to find opportunities
aligned to their strategy potentially as a result of conflict
between these institutions’ financial and social interests.
AECF Connect’s matchmaking service has served to bridge
this gap
Mismatch between the AECF portfolio and appetite of investor community - e.g. Post Conflict, early stage pri-
mary agriculture and small investments, which is the case
for many companies in the portfolio especially in agriculture,
are underfinanced. There exists a gap between some of
the projects that the AECF finances and what investors are
looking for although there has been a shift in the recent past
towards ‘impact first’ investments.
Availability of Capacity Building and Technical Assis-tance Facilities – A good number of AECF grantees are
early stage and lack experience required to operate in chal-
lenging markets. There is limited availability of support to
enable them to thrive. The recent REACT and TZAW funding
has come with a pool of resources for provision of these
services to grantees in those Windows.
Entrepreneur resistance to giving up equity – Many
grantees are wary of equity investments as they do not fully
understand the implications of taking on equity and fear
losing control of their companies. This results in them seek-
ing debt finance even if this is not the best course for the
business. AECF Connect has been providing deal structur-
ing advice and creating awareness on the different funding
types and their implications.
The changing priorities of grantees – Fundraising is a
time consuming activity and a lot of management teams do
not have the capacity to devote enough time to this pro-
cess. Connect supports management teams to prioritise
activities and provides an additional resource to ensure
momentum with investors is not lost.
55
AECF Impact Report 2015
AECF Connect supported Meru Greens Horticulture
Ltd in Kenya, a grantee under the Africa Agribusi-
ness Window, in raising $1.05 million. Meru Greens
is a private company formed in 1996 to produce and
market fruits and vegetables, both in the domestic
and export markets. It works extensively with small-
holder farmers, training in best farming techniques
and aggregating produce. The company is now inte-
grating up the value chain, processing and packing
green beans in glass jars for export. AECF Connect
provided a range of services to Meru Greens includ-
ing introduction to investors, advice on fundraising
strategy, management of investor communication
and advice on terms.
“Our expansion had not put in place technical
advice considerations in many fields of investment.
Our Partnership with AECF Connect has assisted us
to acquire more knowledge in technical aspects of
investing and the benefits to the Company are now
evident. Our disagreements with a Fund Manager
was well mediated by AECF Connect and an amica-
ble resolution was realized. This enabled us to move
forward amidst the hostilities that had developed.”
– Gerald Muthomi, MD
Meru Greens: Value Chain Integration
The AECF is one of the leading providers of catalytic
financing to the dynamic and fast growing market for
off-grid renewable energy in East Africa through its
REACT Window. AECF Connect has been actively
involved in two fundraising rounds for SolarNow in
Uganda which distributes a range of solar home
systems and electrical appliances to households and
entrepreneurs living off the grid through a 24-month
pay plan. Through this business model, the company
makes solar products affordable for BoP house-
holds while at the same time making the business
extremely cash intensive due to the huge volume of
receivables.
AECF Connect provided support in creating an SPV
to split SolarNow’s credit assets from other company
operations enabling the two to be funded sepa-
rately. This ultimately led to a $2 million debt funding
through SunFunder’s newest financial product, the
Structured Asset Finance Instrument (SAFI) into So-
larNow’s SPV. The SPV reduces the risk of providing
loans to SolarNow by using receivables as loan col-
lateral. Lenders also benefit from transparency and
reduced operational risk arising from other company
operations. This is a key market innovation now being
used by other operators.
AECF Connect is also currently supporting a number
of other renewable energy businesses which are at
different stages of the fundraising process.
SolarNow: Innovations in Solar Financing
56 Photo Credit: Future Pump
57
AECF Impact Report 2015
Implementation processes and experiences
The AECF challenges the market to develop novel solutions to systemic development problems. We achieve this by developing competitions in a number of different ways in order to stimulate private sector ac-tors – by defining the geographical or technical scope, offering various options for grants and loans and by including specific impact objectives in the selection criteria.
Another method that has been used to generate more effective market responses and to leverage knowledge is to concentrate on a specific issue and stimulate multiple actors into offering a range of options to ad-dress it. In the REACT Window we could see a large number of applications in the field of PAYGO and biomass and saw the potential for driving the develop-ment of these sectors. We ran competitions which has led to healthy competition that is driving market system change in the household solar energy sector as well as accelerating momentum and innovation towards energy access. In the biomass sector, whilst clustering within the competition process drove the development of a range of innovative approaches, wid-er success has been limited by external factors – for example competition from the unregulated, untaxed firewood and charcoal fuel industry.
For the development of pay as you go solar systems, we provided investment funds of US$6.2m to seven companies who have thus far generated almost US$65m in counterpart financing and an impact for over half a million households. Conversely in the biomass sector we funded projects offering a range of technologies and business models to address a number of different models in biogas, biofuels, power generation (from biomass and agricultural wastes) and
the production of briquettes for industrial and domes-tic use. There has been limited success with these business models so far, demonstrating the continued difficulties, especially in externalities, that impede the sector.
The AECF also funds projects of a similar type or affecting a similar field without being specifically selected to address a technical issue. Input suppliers focused on seeds and poultry are two such examples where a large number of projects have been funded across the portfolio, developing a range of business models. The more disparate nature of this funding, with different models being implemented in different countries at different scales limits the extent to which the AECF drives sectoral innovation. However, it does enable the AECF to generate sectoral level lessons through ongoing, in depth, verification studies which help identify the more successful business models. In addition grantees, especially within the poultry sector, have established collaboration mechanisms to ex-change knowledge.
Clustering of applications in a single area can therefore be an effective tool when the target sector or action is sufficiently homogenous and different proposals can target the same issue. The market will, in time, choose the model most appropriate to the beneficiaries in a specific local context. This doesn’t have to be a tech-nical problem like solar power, it can be a systemic is-sue such as promoting women in business. Even when the sector is not homogenous, there is merit in funding a number of interventions in the same field because there will be aspects within projects that are comple-mentary to each other.
Starting races between similar business models
58
The AECF was originally designed to have the
majority of development impact data collected
through grantee self-reporting. In common with
other challenge funds operating in the private
sector development space, this approach concen-
trated on low cost disbursing of funds to busi-
nesses and a ‘light touch’ oversight, particularly on
due diligence and development impact. Much of
the management resources were concentrated on
contractual and financial compliance.
There were two key drivers for making the moni-
toring and results measurement processes more
robust. First, we needed a better understand-
ing of which AECF-funded projects were having
a significant impact on the rural poor and why,
in order to ensure future competitions were well
designed and the best potential projects selected.
Secondly, it was necessary to have more oversight
over the projects we invested in, to ensure they
were executing the business plans agreed during
the contracting stage or that any changes to their
business plans still benefited the rural poor.
While challenge funds facilitate demand-led solu-
tions to development problems, these problems
need to be precise and well framed in order to
ensure that high quality applications are received.
Equally, investment committees need to have
information about the types of projects that are
successful, as well as the factors which have
contributed to their success, in order to inform their
decision making. Businesses intending to target
the base-of-the-pyramid often find that their plans
are not as commercially sustainable as they had
hoped. Oversight is required to ensure that revised
business plans still benefit the challenge fund’s
target group or continue to work towards improving
market systems that benefit the poor.
These experiences from our early projects have
helped to shape our current systems and pro-
cesses. We have also had to balance ensuring that
the AECF remains ‘business friendly’ and low on
administration with generating the minimum level
of information for management and monitoring.
Our approaches have to cover a broad spectrum
of projects with varied business models, many of
which have specific methodological challenges
regarding assessment of impact. It has to be cost-
effective and deliver donors value for money.
Developing a cost-effective results measurement system
The AECF’s monitoring and results measurement system
59
AECF Impact Report 2015
The diagram on page 58 presents an
overview of the AECF’s monitoring
and results measurement system,
which is two tiered to provide high-
impact projects with an additional
level of verification. All AECF-funded
projects are required to self-report,
submitting project progress reports
biannually containing the self-mea-
surement of key development impact
and financial performance metrics.
Our project managers and results
measurement team review this data
and validate it during site and field
visits, which include a small number
of beneficiary interviews. Project
results measurement tools – results
chains, beneficiary models and indi-
cator tables – are also updated bi-an-
nually once site visits are completed.
Our results measurement tools have
been developed in line with the Donor
Committee for Enterprise Develop-
ment (DCED) Standard for Results
Measurement (see to the right).
We use the tools outlined below to measure the development impact
of our projects. In line with the DCED Standard, all projects have Re-
sults Chains to articulate the logic of their intervention. All our projects
also have beneficiary models to calculate the household benefit num-
ber. Projects in windows with additional funds to work towards DCED
compliance have indicator tables, and we plan to roll these out across
all projects in the future.
• Results Chain: A flow diagram which maps the activities, out-
puts, and outcomes of each project, showing how the project is
expected to lead to development impact.
• Beneficiary model: A cost/benefit model which calculates the
number of households benefiting from the project and net benefit
per household. Net benefit is defined as: Revenue or savings
made by beneficiary as a result of participating in the project –
(costs of participating in the project + opportunity cost of partici-
pating in the project)
• Indicator table: A table of KPIs used to measure each key
change in described in the project’s results chain. The indicators
are both quantitative and qualitative, and the table also specifies
how these indicators will be measured and who is responsible for
collecting the data.
The AECF’s results measurement tools
The Donor Committee for Enterprise Development’s Standard for
Results Measurement provides a framework and the tools necessary
to enable systematic and credible results measurement of private sec-
tor development programmes. Applying the Standard is recognised
as good practice by donors and implementing organisations and as
a result it has become increasingly used since its launch in 2008.
The benefits of applying the Standard include enhanced clarity of an
intervention’s logic and results chains, enhanced quality and value of
performance management data, and improved credibility of reported
impact including systemic change.
We have worked toward compliance with the DCED Standard across
the Africa Agribusiness, Research In Business, Tanzania and Zimbabwe
Windows. This has involved review and improvements of project results
chains, development of comprehensive indicator tables, and commis-
sioning independent verification studies. At time of printing, 11 verifica-
tion studies have been completed and a further six are commissioned
and in progress. Additionally, DCED audits on the Tanzania and Zimba-
bwe Windows will be carried out in the second half of 2016.
The DCED Standard for Results Measurement
60
Our reporting focus is on how much impact we
have on the incomes and employment of the
rural poor. To use our monitoring resources in
the most efficient manner we concentrate on
those projects that are most likely to generate
high returns in the form of development impact
or the number of households affected. High
impact projects, or those expected to have high
impact in the future, are subject to a higher level
of interrogation of the data they report. Results
measurement tools are updated more regularly
and triangulated against external sources. An
additional level of quality assurance is under-
taken when projects have scaled with technical
consultants hired to conduct impact verification
studies which enables us to bring both quality
and independence to the analysis.
This two tiered system enables us to take a
pragmatic and cost-effective approach to
monitoring and results measurement in a large
portfolio. While high impact projects only make
up approximately 15% of the active portfolio,
they accounted for 79% of the AECF’s impact
(by total net benefit) in 2015. Commission-
ing impact verification studies for all projects,
rather than just the high impact projects, would
not be cost effective.
Focusing additional management resources on
the high impact projects enables us to maxi-
mise the percentage of our portfolio that has
had its impact independently verified while
holding costs down. However, it is not always
the big projects that have the most to teach us
and broadening the impact verification mecha-
nism in the future would be a useful way of
generating knowledge from all aspects of the
AECF activities.
The last hard number is a key component of the
beneficiary model the AECF uses to calculate the
development impact of each project. It is a number
(or small set of numbers) that a business uses as an
integral part of its operations and which it is able to
report directly from its own management records that
is the nearest number to the development impact
number we seek. An example of a last hard number is
the volume of hybrid seed sold in a year by one of our
input supply companies.
Having extracted the last hard number from a busi-
ness, the AECF then identifies the causal relationship
between the last hard number and the development
impact. For example, our team will establish in the
field the average amount of hybrid seed used per
farmer per year. The last hard number can then be
divided by this average to enable us to establish the
number of households reached by the input supply
project.
The concept is a valuable one because it means
businesses report actual data that they collect in the
normal course of doing business, helping ensure high
quality data, minimising data collection costs, and
making it possible for the data to be effectively veri-
fied by the AECF.
The Last Hard Number
61
AECF Impact Report 2015
The AECF provided funding to the Central African
Building Society to develop its mobile banking plat-
form, Textacash, which enables users in Zimbabwe to
safely transfer money, send and receive remittances,
and pay bills. In 2014, we commissioned an impact
verification study to measure the impact that Texta-
cash has on its users.
The AECF’s projects are designed to target poor
communities and are required to include 60% of their
beneficiaries as households living on under US$2 per
day. The study used a series of measures such as as-
set ownership, house sizes and building materials as
proxies for the household income of Textacash users,
and found that only approximately 10% of users met
the AECF’s definition of ‘poor’. With the information
gathered from the verification study, the AECF MRM
team can convert the number of Textacash users
in any given year to beneficiaries who fall within the
AECF’s target group and therefore generate an over-
all figure for impact.
Assuming one user per household, in 2015 Textacash
had approximately 227,000 users. 22,700 of these
(10%) were assumed to live on under US$2 per day.
As the AECF requires only 60% of project beneficia-
ries to live on under US$2 per day, we can include an
additional 40% - a further 15,100 users - to get a total
of 37,800 households benefiting in 2015.
This highlights the importance of conducting impact
verification studies and extrapolating impact based
on their findings and is part of our drive to report
credible results and ensure that the AECF’s impact is
not overstated.
Case study: CABS Textacash
We provide funding over three years and collect perfor-
mance data for a further three years. At that point, proj-
ects graduate from our supervision and we collect only
development impact on an ad hoc basis where companies
are willing to continue to engage with us. It takes many
of our companies most of this period of supervision to
come fully to scale and so stopping the monitoring of their
performance after year six not only fails to capture the
true benefits we provide but also limits what we can learn.
Although the monitoring and especially learning require
budgets, concentrating resources on a limited number of
projects over a ten year period would enable full economic
cost benefit analysis and longitudinal surveys to be under-
taken and greatly improve our understanding of how we
impact on the rural poor.
62
In order to demonstrate additionality, the AECF
needs to invest in businesses that have difficulty
in raising funding elsewhere, despite having in-
novative and commercially viable business plans.
As we explore elsewhere in this report, this may
be because business models are too novel or
immature for commercial financing, the project
environment is too challenging, the repayment
period too long or, especially for grant funding, the
type of activity does not fit the objectives of the
donor. Funding unproven projects in challenging
environments means that we can expect some to
fail – indeed having projects fail is a key indicator
that tells us whether we’re taking enough risk in
our investment decisions.
Both before and after contracting our grants
teams undertake extensive due diligence on the
projects we fund, including a detailed analysis of
the likelihood of project success. This does not
mean that we will not fund risky projects, but it
gives us a better understanding of the risks that
we and the grantee are likely to experience during
implementation. Once contracted, we carry out
regular monitoring and disburse funds in tranches
against both financial and development perfor-
mance indicators, which gives us a degree of
management control.
As the projects we invest in operate in difficult
environments or are testing new and innovative
technologies and business models, we recognise
that they need time to succeed. Revising targets
in recognition of challenges in implementation
provides important flexibility to the businesses we
fund. However, projects do in some cases fail or
Learning from project failure
A person who never made a mistake never tried anything new
- Abraham Lincoln
“”
What is failure?
For the purposes of this report we consider ‘failure’ to be when a project is closed before achieving its
intended (or revised) project goals. This could be because the business model proved not to work, the
grantee decided to terminate the activities (such as if the company was sold), the AECF decided to termi-
nate or the project (usually for administrative non-compliance) or external factors meant the project could
otherwise not proceed (for example, regulatory permission was not provided).
63
AECF Impact Report 2015
A total of US$18m of AECF money was committed to
these failed projects, of which US$8m was actually dis-
bursed before contracts were terminated. Risk sharing
with the grantees brought an additional US$20m invest-
ment. Although the AECF also spends money on due
diligence and management for failed projects, the overall
proportion by value of donor funds to the total committed
remains below 4%. In addition, many of these projects
which do not ultimately succeed do generate benefit dur-
ing their lifetime – Olam Nigeria ultimately did not survive
but provided over US$6m of benefit to more than 3,500
households.
Reasons for failure
are terminated and remaining funds reallocated.
Over the course of the past eight years rates of
project failure have been very low. As individual
projects age and the scale and scope of the
portfolio as a whole increases, the likelihood of
failure also grows. Equally, funding smaller and
more innovative projects as happened during
2015 increases the failure rate.
By the end of 2015 a total of 29 projects – or
about 12% of the portfolio - have failed (an addi-
tional six were closed after successfully com-
pleting their project) since the start of the AECF,
with 21 of these in 2015 alone. The AECF has
a target failure rate of 30% and coming close
to this rate is a key indicator that we are taking
sufficiently risky investments. As the portfolio
matures we expect more projects to fail and our
overall rate to move towards this target level.
Of these 29 failed projects, six were closed at
the request of the grantee because of changes
in business circumstances or the inability to
achieve regulatory or financial pre-conditions.
Three were closed by the AECF due to non-
compliance with procedures or reporting. The
remaining projects failed because the business
model was not viable. All AECF windows have
had projects fail. The General Window (at 11
projects) has had the highest failure rate, driven
by the fact that it is the oldest window and so
most likely to have had failing projects closed.
The Zimbabwe Window unsurprisingly has had
a large number of bankruptcies in its total of six
failures.
Non compliance
External factors
Business plan failed
64
The AECF has provided funding for a broad scope of
projects including food crops and cash crops, inputs of
seed, feed, fertilizer and finance, investment in infra-
structure and equipment and covering goats, sheep,
camels, cattle, fish, fowl and even flies. The competi-
tions do not target specific crops or processes but
challenge the market to define what can best be done
to reach the rural poor.
Although sub-Saharan African agricultural sectors vary
tremendously in physical, political and economic envi-
ronment, there are a number of areas that have been
particularly attractive for investors. Both poultry and
high yielding seeds have generated successful applica-
tions from a range of business models and both have
experienced varying levels of success. With several
years of implementation experience impacts are start-
ing to be seen and lessons learned that will improve
both the future AECF, but also the broader knowledge
of private sector development in these areas. In both
sectors, important impact verification studies will be
undertaken during 2016 for some of the key projects.
Poultry
Poultry is seen as being an ideal enterprise for the
rural poor because it requires limited amounts of
capital and knowledge, can be readily delivered to out
growers in complete packages of animals and feed,
has a well-defined production schedule and financial
return and creates a homogenous product that can be
readily integrated into a wider value chain.
The AECF has attracted investment in the poultry
sector from feed manufacturers wishing to create a
broader market base, egg and meat producers wish-
ing to establish a broader production system, and day
old chick producers wishing to expand their markets.
It involves both introducing new business models and
changing existing production systems and working
with high numbers of very small producers and small
numbers of larger producers.
How AECF projects reach the
poor – examples of poultry
and seedsOf all the AECF funded poultry projects, one has been
a stand out success and has truly disrupted the market
in which it operates. AgFlow Poultry in Ethiopia, trading
under the brand Ethio chicken, imported exotic breeds
that perform well in backyard conditions and sells
packages of day old chicks and feed using a similar
approach to other companies targeting smallholders.
But instead of dealing directly with end beneficiaries,
it sells day old chicks to intermediaries who then sell
on grow out packages once the birds reach six weeks.
This enables the company to concentrate on what it
does best – producing chicks and feed - and to rapidly
scale. The number of households benefiting grew from
23,000 in 2013 to 242,000 in 2015. In 2013, it produced
220,000 day-old chicks per year; in 2015 the business
sold over 3m, and has a target of 20m by 2018. In 2015
the company generated an average of US $68 for over
240,000 households. Other grantees who have at-
tempted to establish vertically integrated businesses
throughout the poultry supply chain have substantially
failed as the table on page 65 illustrates: identifying,
recruiting, training and managing large numbers of
smallholder farmers has proved to be too difficult.
In 2016, the AECF will be conducting both impact veri-
fication studies on Agflow Poultry and a detailed learn-
ing study on outgrower models and how they affect
both end beneficiaries and the grantees themselves.
AgFlow Poultry - Ethiopia
65
AECF Impact Report 2015
Projects range geographically from Ethiopia in the
north to Mozambique in the south, Tanzania in the
east and Sierra Leone in the west. Most grantees
are well established and substantially vertically
integrated in the feed and poultry production pro-
cess. A total of eight projects are funded through
Africa Agribusiness and Post Conflict Windows as
well as through the country windows of Zimbabwe
and Tanzania, with a total funding commitment of
US$5m from the AECF and US$10m from matching
funds. Only two were start-ups and the remainder
existing small and medium enterprises.
Problems of poor husbandry, theft, poor facilities,
side selling and disease have led a number of the
AECF beneficiaries to move to the Brazilian model
of a smaller number of farmers with much bigger
flocks of birds. As we discuss in the market sys-
tems change section of this report, in Zimbabwe the
poultry sector has gone through significant change
due to well reported factors in the wider economy
and the increase in poultry as a meat source over
beef. Traditional large commercial producers
struggled to cope with land reform and the ensuing
economic crisis and whilst new entrants appeared,
both needed protection from low cost imports.
With the growth of smallholder producers moving
into the space, AECF has supported innovators in
both the out grower and feed sectors. Profeeds es-
tablished a network of retail outlets to sell 100 bird
broiler packs including feed and veterinary drugs,
supporting the small scale production of 12 million
birds in 2015. Sable Farms scaled up this innovation
to produce a small scale commercial poultry pack
- after starting with 500 bird packs they now work
with 52 contracted farmers who must be able to
produce batches of at least 20,000 birds to stan-
dards of the formal market. This model is now being
copied both by Profeeds themselves through a new
entity and another AECF grantee in Mozambique,
who also started with smallholder farmers before
revising their approach.
AECF funding, together with other investors, has
been critical in enabling companies to innovate and
disrupt markets. Some key lessons that we dis-
seminate to all our poultry grantees is that models
have to be tested and if necessary revised to the lo-
cal context, scaling of funding beyond the AECF is
imperative from an early stage and grantees should
concentrate on their core business and bring in oth-
ers for important but peripheral tasks.
Impact of poultry projects in 2015
2015 development impact by sector (all active projects)
Sector Number of households
Net benefit per household (US$)
Cumulative benefit (US$)
Yelo Egg (Pvt) Ltd 2,530 458 3,940,604
Agflow (Ethio chicken) 242,200 48 23,154,335
New Horizons Mozambique Limitada 0 0 96,895
Mozambique Fresh Eggs, Lda 18 147 15,210
South Farmers Company Ltd 0 0 23,300
Pajah & I.J (SL) Ltd 4,200 65 482,600
Misenani Agri Services Ltd 1,255 198 274,950
Sable Park Enterprises 52 1,778 92,456
66
High yielding seed varieties have potential to
generate significant development impact - usually
for very large numbers of households but in small
amounts. They are also important to the rural poor
for food security as most crops targeted by AECF
grantees are also part of the subsistence ration of
the household. Business models include selling
seeds to farmers, recruiting farmers as out grow-
ers of seed, and providing seed for growing out
of crops for the grantee. The majority of grantees
produce high yielding maize, but we also fund
project focused on the production of potatoes,
groundnuts, sorghum, cow peas and other short
season crops.
12 seed supply companies generated an average
benefit of US$121 for over 400,000 households
in 2015 and have generated over US$119m in net
benefit to poor families since the start of the AECF,
with 95% of this benefit coming from the top five
grantees. In total the AECF committed US$7.5m
and generated US$14m in commitments from
grantees. Measurement of benefit does not include
the incremental benefit for existing farmers who
gain access to better seeds or benefit that can ac-
crue to other farmers from open pollination.
As most grantees are existing companies, funds
are used principally to expand existing production
or distribution infrastructure and to promote seeds
amongst harder to reach smallholders. Although
the projects have reached a large number of bene-
ficiaries, innovations have been difficult to achieve.
The establishment of a one stop shop for inputs by
Dryland Seed has not materialized after funds ran
out and attempts by commercial maize producers
in Zimbabwe to reach the smallholder have proved
too complex to manage. Establishment of networks
of retail outlets or comprehensive extension efforts
to engage with the smallholder are expensive,
costs are not likely to be recoverable and it remains
to be seen whether they can be continued after
AECF money is exhausted – especially as most of
the grantees are still reporting cumulative losses.
None of the AECF projects that generate the most
impact are disruptive to the market or particularly
innovative. The poultry sector, which has seen new
business models and the packaging of inputs to
effectively target smallholders, perhaps has some
lessons for seed producers.
Although producing large development impact,
most of the seed production grantees are medium
scale businesses which include government sup-
port programmes as major clients and often rely
on donors for investment and research capital.
Backing very small seed companies does not work
and the target for investment should be medium
sized local companies that have good varieties and
which are likely to be buy out targets for multina-
tionals. Syngenta, Monsanto, Du Pont and Groupe
Limagrain have all begun to engage in the African
seed industry in recent years, including buying a
stake in one of our companies. In addition, future
AECF funding of the seeds sector needs to target
companies that are proposing truly innovative or
disruptive models. We are seeing some evidence
of this, with financial services providers linking with
input providers to offer bundled inputs and ser-
vices such as crop insurance.
Seeds
67
AECF Impact Report 2015
Input suppliers - seeds
Weste
rn Se
ed
Drylan
d Seed Lt
d
Kisima F
arm Li
mited
ExAgr
is Afri
ca Li
mited
Seed Co Ta
nzania
Limite
d
Century
Seed Co. L
td
Kenya H
ighlan
d Seed Co. L
td
Kilimo M
arke
ts
Phoenix Lim
itada
Leldet L
td
Kencor M
anag
ement Servi
ces (
PVT) Ltd
Proge
ne Seeds
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
0
50
100
150
200
250
300
350
400
450
Number of additional household Net benefit per household
Input suppliers - seeds
We’ve shown through the clustering of similar projects under the REACT Window and the financing of specific
industries across multiple windows that concentrating funding has the potential to generate both competitive
innovation and knowledge. This can lead to market system change and be truly transformational for the rural
poor. Developing funding mechanisms for a specific industry or crop, either within a geographical region or
more broadly, should be a priority for the future but should also be accompanied by the knowledge manage-
ment tools needed to identify, operationalise and disseminate lessons back into the industry.
68
Although there are no projects in the AECF
portfolio that explicitly target a specific gender,
the majority of beneficiary households contain
both genders and project impact is measured as
increased household income or savings. Since the
household is the unit of analysis, it is challeng-
ing to disaggregate these dollar benefits between
the female and male household members. For
many of our projects, we are reliant on the busi-
nesses we fund providing the ‘last hard number’
(see page 60) and in most cases they do not keep
gender disaggregated data on their customers or
they sell or buy through intermediaries and do not
know who their end beneficiaries are.
The DCED Standard for Results Measurement
(see page 59), which several AECF Windows are
moving towards compliance with, requires pro-
grammes to have a mechanism for assessing and
understanding differentiated results by gender,
and programmes should, as a minimum, disaggre-
gate impact data by gender in order to understand
any variations in benefits for men and women.
Working towards addressing gender better
When women do better, economies do better
- Christine Lagarde, Managing Director, International Monetary Fund, Davos, addressing the issue of inclusive growth.
“”
How does the AECF target and monitor impact gender?
Photo Credit: New Light Africa
69
AECF Impact Report 2015
Does the AECF benefit women?
Although there are no projects in the AECF
portfolio that explicitly target a specific gen-
der, there are projects in the portfolio that due
to the nature of their business have targeted
or benefited women specifically. For example,
growers of Stokman Rozen Kenya prefer to
employ more women than men on the flower
farms because “women generally tend to be
more careful, are faster and keen in terms of
spotting diseases”. We counted a total of 25
projects, most in agribusiness, which target-
ed or benefitted women specifically.
There are also projects within the portfolio
that have a difference in how men and women
benefit or are engaged by the projects. Lima
Limited reports that “men and women are
hired for different casual labour positions.
“Men do most of the grass cutting and hole-
digging for planting seedlings on the Elton
farm, while women do fine weeding and
working in the nursery”
Over time the AECF has sought to better
understand the differences in project impacts
on men and women, and has worked towards
integrating gender concerns into its ongoing
monitoring and results measurement activities.
At the level of the business, we disaggregate
jobs created or maintained for men and women
as a result of our funding. However, we still do
not systematically disaggregate quantitative
impacts by gender at the household level. In
the AAW Round 2 window funded by Cana-
dian DFATD that was contracted in early 2016,
emphasis will be put in the evaluation on the
inclusion of gender.
We use a mixture of grantee self-reporting and
site visits to gain qualitative insights into any
specific ways that the business models ben-
efit women and men as well as more in-depth
examinations of projects and sectors to gener-
ate gender specific findings. Within the site visit
reporting exercise we seek to identify whether
women have been targeted and whether there
are differences in the way that women are en-
gaged by, or benefit from, the project compared
to men. We aim to meet with men and women
beneficiaries in the field to develop an under-
standing of how they are affected differently.
70
An analysis of the gender impact of the AECF would require detailed household level data to review impacts
on gender roles, control of assets and behaviour at household level. Projects in the AECF portfolio target rural
households and it is assumed that the household is receiving the benefit whether it enters via the male or fe-
male member. The graph below highlights the benefits that were reported as accruing to women explicitly as a
result of AECF projects in 2015.
Gender impact of AECF projects in 2015
Frequency of benefits for women from AECF projects
Women employed by the projects as other staff
Agribusiness Financial Services Information Renewable Energy
Women employed by the projects as board members
Access to knowledge and training
Improved income
Improved health and lightening women’s burden
Increase in savings
Access to credit
Increased study hours for children and increased working hours
Ability to use or purchase own assets
50
23
23
21
16
7
9
6 3
3
2
5
2 6
7
5 3 11
3 1
22
3
Frequency of benefits for women from AECF projects
The most frequently cited benefit to women in the portfolio is job creation, both in management positions
(board members) and also as other staff (e.g suppliers, direct employment). The majority of these jobs are fo-
cused on agriculture, due to the weighting of the AECF portfolio towards the agribusiness sector. Nevertheless,
only 37% of the positions created by AECF funded projects in 2015 were filled by women, due to conservative
traditional cultures prioritising male employment and the physical demands of manual labour in the sector.
Qualitative analysis of the portfolio (see below) does suggest that that a number of our projects have delivered
important benefits to women, particularly through improvements to women’s health and lightening their burden
and workload. Women are traditionally responsible for the collection of fuel for cooking and household energy
consumption, frequently using inefficient cook stoves in unventilated homes. These tasks are both physically
demanding and time consuming, and disproportionately affect the health of women. Projects in the REACT
Window specifically provide a range of alternative fuel heating systems that have the potential to benefit women
in their domestic roles.
71
AECF Impact Report 2015
With monitoring still substantially based on infor-
mation generated by the management information
systems of the grantees, our challenge is to, on the
one hand, prescribe methodologies and indicators to
capture gender data that are achievable for grant-
ees and, on the other, to increase the engagement
of grantees in gender issues within the scope of
their commercial activities. As noted above, we have
already changed the way we score grant applications
under Africa Agribusiness 2. Further approaches to
be developed over the next year include:
• Further revise our reporting format to better
understand whether and how women are eco-
nomically empowered by the project. Questions
will be developed to identify the ways of access-
ing resources and the enhancement of power
and agency as well as increases in income, skills
development and employment opportunities,
time-use, decision making abilities and physical
mobility. Although we already interview benefi-
ciaries in the field, this needs a more specific
approach to generate a better profile of how men
and women interact in the household.
• Analyse through a learning study the strengths
and limitations of the current approaches to
gender, including a review of the likely gender
issues that could be expected from the type of
projects that the AECF finances. We would like
to know more on women owned businesses,
women managed businesses, women employed
in AECF businesses, women involved in AECF
value chains and women as beneficiaries either
as producers or consumers.
• Mainstreaming gender into verification stud-
ies: We have a number of verification studies due
to be undertaken on high impact projects during
2016 that will involve primary data collection from
beneficiaries in the form of field surveys. This
represents an ideal opportunity to enhance our
understanding of gender impacts at the house-
hold level.
• Strengthen the management systems to
better include gender: Whilst we cannot force
companies to change their business processes,
we can and should make awareness of the im-
portance of gender in business a central theme
of future competitions. In a practical sense,
this means better mainstreaming of gender in
the design, promotion and evaluation as well as
enhancing knowledge of gender within the staff
of AECF.
Improving how the AECF measures gender impacts
72
The method which the AECF uses to calculate the
benefit that it generates for poor people focuses
on financial returns through a simple cost benefit
analysis of a typical beneficiary household, as well
as the counting of jobs created directly in AECF
funded-businesses. The REACT portfolio gener-
ates non-income environmental benefits to society
as well as other public benefits including electric-
ity generation for the national grid.
By looking at the AECF’s (REACT) window we can
develop an understanding of the kind of non-mon-
etary benefits that the AECF generates. REACT
businesses which produce innovative solutions to
climate change mitigation, adaptation, and rural
energy access, with projects in solar, biomass,
forestry and other alternatives to fossil fuels.
Biomass and biofuels projects take organic feed-
stocks, frequently wastes, and convert them to
energy products by a range of physical processes.
Non-monetary benefits include the removal of
waste from the local environment and consequent
reduction in disease and improvement in hygiene;
reduction in the gender based drudgery of fuel
wood collection; and recirculation of important
agricultural nutrients that would be otherwise lost
to the farming system.
Introducing technical know-how in climate change
adaptation and novel approaches to agriculture
(climate smart agriculture) at the smallholder level
offers a wide range of non-monetary benefits. This
includes improved resilience in the face of climate
change from consistency in the production of food
and better educational performance due to im-
proved nutrition throughout the year.
Accessing electricity through off grid solar provides
a wealth of benefits in addition to those gained
directly from economic endeavour – the ability to
charge mobile phones brings a host of both direct
and indirect benefits from accessing information
including information on crop prices and planting
to maintaining social ties with distant relatives and
learning from the Internet. The use of electrical
cooking and heating devices reduces fire hazards
in the house and local environment, and improves
health by reducing exposure to particulate matter
and accidental consumption of kerosene. Lighting
improves education, safety, security for people and
property and enhances leisure quality and social
networks.
Finally, promoting forestry not only creates income
and jobs but also improves oxygen levels, induces
local rainfall and maintains a regular rainfall pattern,
prevents soil erosion and flooding, combats de-
sertification and provides both scenic beauty and
biodiversity preservation for future generations.
Wider public benefits in the REACT portfolio
73
AECF Impact Report 2015
Reach to the Bottom of the Pyramid
With some REACT companies now reaching up to four
years in their six year AECF terms, it is interesting to
look deeper into the characteristics of the beneficiaries
(customers or suppliers) that they are reaching and
the impacts seen beyond the benefits that the AECF
characterises in its models. Questions include:
• Are REACT companies reaching the poorest
customers (i.e. people earning less than US$2
a day)?
• How deep are the market segments that, in
particular, off-grid solar home system provid-
ers really reach?
• Given the relationship between gender, energy
and poverty reduction, to what extent are
women benefiting from the products and ser-
vices offered by REACT companies and how
are these benefits manifesting themselves?
There are several notable insights from the portfolio:
1. Pay-as-you-go for solar may well be considered
a “silver bullet” solution for electrifying previously
unserved off-grid rural populations. The perfor-
mance of REACT pay-as-you-go solar companies
so far indicate that this is a business model with
the potential to be as transformative for the elec-
tricity sector as mobile money has been for the
financial sector.
2. From observation of the portfolio so far, it is very
difficult (and perhaps unrealistic to expect) the
private sector to reach the “subsistence” segment
of the BOP market, that is, people who eke out
a living on less than a dollar a day . This segment
is highly vulnerable and needs other intervention,
for example, through specific government pro-
grammes.
3. Companies such as Nuru Energy in Rwanda,
Gesto Energy and Fortune CP in Mozambique are
attempting to address the poorest segments of
the market by using centralised charging stations
to reach their customers. This model involves the
customer purchasing either lights or batteries for
a low upfront cost. These are then brought to the
station and charged for a small fee. The models
are yet to prove themselvesix, major constraints
lie in the convenience (travel time and distance
to the station) and utility (flexibility of use) for the
customers. More recently Heya! (Newlight Africa)
is introducing a pay-as-you-go payment system
for an entry level solar lantern to also try and ad-
dress this market segmentviii, but once again they
are in the early stages of developing their business
model.
4. However, other companies where business
models are already showing traction in the market
present a possible cost-effective and efficient
channel for delivering high quality services to
poorer market segments, provided they are incen-
tivised to do so. Companies, such as SolarNow in
Uganda, would be willing, for example, to provide
their solar systems, warranties and after-sales
support to targeted poor and vulnerable custom-
ers e.g. single mothers; widows; grandmothers
raising grandchildren in rural poor areas, if there
were government subsidies available to support
such groups. Evidence in other parts of the world
has shown that subsidies of this kind, especially to
utilities in providing connections to the poor and
vulnerable, have been effective . Utilities have lim-
ited reach; the private sector, with its rural off-grid
distribution networks and know how may provide
an alternative option for such programmes, if they
can secure support to do so.
74
5. Whilst it is natural for the REACT
companies to continue to pursue their
easy-to-reach target markets, evi-
dence is beginning to emerge on how
some REACT portfolio companies are
trying to extend to harder-to-reach
customers, whether these are custom-
ers who are very poor or simply more
dispersed than their existing distribu-
tion chains can reach.
One way is through the use of specialist
last-mile distributors who are beginning
to enter the market. Another way is by
harnessing group micro-lending networks
(“table-banking”), in particular of women
groupsx. During 2016 it has been inter-
esting to observe several companies in
the REACT portfolio (e.g. BBOXX, Azuri
Technnologies, Microenergy Credits,
Ecosmart and M-KOPA) starting to reach
out to such groups not only to increase
their customer outreach but also to provide
an additional level of security when con-
sidering how to strengthen credit checks
and minimise default rates by new custom-
ersXi. This is a very interesting use of social
rather than physical collateral, to enable a
customer to get their foot onto both energy
and financial ladders. The evidence so far
is anecdotal but this potentially an area
of research to look into, both the extent
to which table banking is being used and
whether there are possibilities to promote
it in a more structured and systemic way.
The case study below provides a powerful
example of how an exciting and ambitious
entrepreneur has managed to use the sys-
tem to raise financing for her business.
End user financing that allows customers to pay for
clean energy assets in affordable increments is a
key factor in the rapid uptake of off-grid solar home
systems and other clean energy products (e.g. cook-
stoves). Pay-as-you-go solar is a digital technology
based end-user financing solution that has shown
tremendous success so far, particularly in parts of
Kenya, Tanzania and Uganda. It is bringing many
people into the “net” of institutional credit facilities,
who otherwise do not have adequate collateral or
documented credit histories to secure loans. How-
ever, the solution is not widespread as yet: it depends
upon mobile phone network access and reliability;
companies offering the solution are young rapidly
expanding start-ups (and therefore risky, in an overall
business context); companies have yet to build out
comprehensive distribution structures; and so far,
the products offered are proprietary and do not offer
flexibility of use or consumer choice.
REACT companies such as Microenergy Credits
(MEC) and Suntransfer Kenya (STKE) might not be
achieving as rapid growth as some of their pay-as-
you-go competitors, but are steadily building end-
user financing mechanisms and distribution networks
through partnerships with microfinance organisations
and rural banks. Both MEC and STKE can be cred-
ited with building awareness, interest and markets for
renewable energy products in a previously reticent
rural finance sector. For example, MEC has worked
with Equity Bank to develop and roll out the Eco Moto
loan, specifically for clean energy products. So far,
the repayment rates of such loans have been prom-
ising, but the financial sector in Kenya is yet to fully
embrace such lending. Should it do so, it has the po-
tential to provide a viable and interesting complement
(and competitor) to digital pay-as-you-go financing,
with the advantages that such organisations are al-
ready present throughout the country, are known and
From a customer to an entrepre-neur: how table-banking has helped Aileen Chemng’etich to scale the energy and financial ladder
75
AECF Impact Report 2015
trusted brands, and are able to offer flexible loans
that aren’t restricted to a limited range of products.
Further, they are likely to be able to offer far more
attractive interest rates to consumers than the 20 –
30% currently observed within the pay-as-you-go
solar companies in the REACT portfolio.
However, the potential benefits go further. “Table
banking” (also known as group micro-lending) is
a way in which asset poor people are able to get
together, for example as a women’s group, and ac-
cess formal credit from rural financial institutions,
using social collateral rather than physical collateral.
This was an approach that was pioneered in Ban-
gladesh in the 1970s by Grameen Bank and subse-
quently has shown successes in India and in Kenya,
as a way of expanding the reach of microcredit
programmes for both asset and business financing.
Take, for example, Aileen Chemng’etich, a member
of the Taunet Nelel women’s group in the Nandi
Hills region of Kenya. Aileen started off as a MEC
/ Equity Bank customer, using an Ecomoto loan to
purchase energy saving cook stoves and a solar
lighting system. These products helped her to
reduce her household energy expenses by more
than a half. Quickly spotting an opportunity, Ai-
leen decided to start a clean energy business as a
stockist of the same tried and tested products she
was using in her own home.
In 2012, she secured a group social collateral guar-
antee from her women’s group and collateralised
her household energy assets to access a loan of
Kshs 250,000 (US$2,500) from Equity Bank. Aileen
used the loan to stock up her business in Kaptumo
market. Her business has grown rapidly - Aileen has
repaid the loan completely and she has now applied
for a new loan to further increase her stock and
expand her business to another branch. From an
unbanked rural woman to a clean energy customer
and then into a clean energy entrepreneur with an
expanding business and a well performing business
loan, Aileen is an example of how clean technology
and creative end-user financing mechanisms can
unleash potential in rural areas.
“The Ecomoto loan enabled me to access a low cost energy saving cooker that has re-duced my energy expenses for cooking by more than a half. I have always wanted to start and manage a business that improves the living standards of women in rural areas and now my dream has come true as a result.”
Photo Credit: Micro Energy Credit
76 Photo Credit: Esco Kivu
77
AECF Impact Report 2015
i http://www.pewresearch.org/fact-tank/2015/09/24/sub-saharan-africa-makes-progress-against-pover-ty-but-has-long-way-to-go/
ii Through household cost savings or through in-creased household income
iii A crude measure of the overall value for money delivered by the AECF (cost effectiveness), calcu-lated by dividing the total net benefit plus wages for the period by the total AECF funds disbursed for the same period.
iv http://blogs.worldbank.org/developmenttalk/youth-bulge-a-demographic-dividend-or-a-demographic-bomb-in-developing-countries
v World Bank. 2012. World Development Report 2013: Jobs. Washington DC.
vi http://www.africapay.org/tanzania/home/salary/minimum-wages
vii http://www.enterprise-development.org/wp-con-tent/uploads/DCED_Reader_March2016.pdf
viii https://hbr.org/2011/06/the-globe-segmenting-thebase-of-the-pyramid
ix EGG-Energy, a R1 company with a similar model in Tanzania has now closed down
x Plenty of references, toolkits and case studies avail-able here, ESMAP publications on gender and social inclusion in the energy sector: http://www.esmap.org/node/1161
xi See for example: http://www.dobequity.nl/east-af-rica-fund/copia-global-kenya/; http://www.inclusive-businesshub.org/know-how-last-mile-distribution/; https://sokowatch.com/; http://livelyhoods.org/sale-snetwork/ismart-kenya
End Notes
78
Recommended