Dahabshiil Bank International (DBI) recently unveiled an initiative named the Powering Progress Fund (PPF or the “Fund”) at the Somaliland Investment Forum, Hargeisa,which seeks to create positive impact through Sharia-compliant investments in renewable energy technology used in SME projects.
`It was a pride of Dahabshiil Bank International to provide customers uncluttered, easy access to banking, financing and investments, he added.
DBI partners with Arsenault Family Foundation (AFF) and Shuraako to entrepreneurs and businesses wishing to initiate or improve on existing renewable energy to upgrade and increase production with the added value of job creation – a central proviso in the investment offer.
Dahabshil Bank and AFF jointly pledged a combined fund of US$ 750 000 and Shuraako will be administratively running the project.
The PPF welcomes all for-profit enterprises to apply for investment ranging anything from US$25 000 to US$250 000 to a custom financing terms of up to 3 years.
Successful applicants will be screened through set criteria that requires, for instance, that applicants to contribute a minimum of 30% of the total project size in cash or in equivalent tangible assets, and that they pledge collateral depending on size of the investment capital extended.
The Fund aims to create a positive economic impact for beneficiaries in respective areas of implementation: Somaliland, Puntland and SC Somalia.
Earlier this year MicroDahab MFI announced a collaboration with SolarGen Technologies to create the first ijarah thumma Iqtina (“lease to purchase”) sustainable energy product in Somalia.
The initiative will enable clients to own a solar-powered water pump that would otherwise be prohibitively expensive for farmers and other small business owners to buy.
MicroDahab’s potential for success is due, in large part, to making greener financing decisions informed by real knowledge of what is happening in climate-affected places.
Somalia is often cited as one of the most expensive countries in the world for electricity. For example, the average Somali farming village spends $80,000 in fuel costs to power generators for water every year. Now, solar powered water pumps will achieve a cost saving of an estimated $60,000 per village per year. MicroDahab will bear both the capital cost and risk of asset ownership.
Dahabshiil Group is keen to advocate the mainstream application and consumption of solar technology. The Somali territories have an abundance of solar energy that can be harnessed to both decrease cost-inefficiencies for businesses and provide a safer and more sustainable clean energy solution for hundreds of communities across the region.
Micro-loans are a vital tool for farmers and rural entrepreneurs to upgrade their businesses or invest in the next growing season.
MicroDahab now has the potential to help the most vulnerable adapt to climate change by providing individuals and households with a means of accumulating and managing the assets and capabilities needed to become less susceptible to shocks and stresses or cope with their impact. Agribusiness remains the most prominent trade in the Somali territories given the favourable conditions for agricultural development.
The water pumps project is a pilot for a wider social impact agenda driven by Dahabshiil Group to provide enterprising micro business owners with access to machinery such as tractors and irrigation equipment coupled with an education programme to increase technical know-how among agriculture professionals.
Dahabshiil Group has partnered with the African Enterprise Challenge Fund (AECF), among others, to launch the MicroDahab initiative. The fund manages a portfolio of $200 million across the African continent and is supported by the governments of Australia, Denmark, Netherlands, Sweden and the UK, as well as the International Fund for Agricultural Development (IFAD).
The solar powered water pumps project was announced at a gala event that marked the one-year anniversary of MicroDahab. Since MicroDahab was created in July 2014 to provide financial products to unbanked communities in remote areas who otherwise struggle for access to finance. Already, MicroDahab has invested a gross financing of over $1 million.
The initiative has served over 15,000 beneficiaries — which has created new employment opportunities — while 70 per cent of MicroDahab’s customers are female and predominantly low-income earners.
The success of MicroDahab follows the wider shift throughout Africa towards creating financial services products that increase access to finance and cater for low-income individuals. In a similar vein, last year, Dahabshiil Group launched eDahab, a mobile payments platform that enables micro-transactions and better management of funds received through remittance transfers.
The microfinance model is an alternative to the retail finance model prevalent in mainstream banking, as it is estimated that around 80 per cent of the continent’s population is unbanked.
By Ahmed Mohamed Daud