Sharia-compliant solar financing to boost energy access in Somalia.
Acumen’s Hardest-to-Reach (“H2R”) initiative has invested $1 million in KIMS Microfinance, the largest microfinance institution in Somalia, to support the scaling of its off-grid solar financing activities. This investment is anticipated to bring energy access to 17,000 people and reach 440 businesses and large households with productive-use energy, helping to facilitate local economic activity.
In Somalia, half the population has no electricity, and those who do often pay around 65 cents per kWh—double the highest rate paid by U.S. consumers. These typically diesel-powered systems are expensive, unreliable, and carbon-intensive. Yet Somalia has over 310 sunny days per year, which is enough to meet most of its energy needs. However, uptake remains low due to high costs and weak infrastructure, which is exactly where patient, catalytic capital can make a difference.
With support from the British Embassy Mogadishu and UK aid from the UK government via the Transforming Energy Access platform, Acumen has invested $1 million through the Catalyze component of the Hardest-to-Reach Initiative, which provides patient capital to early-stage companies. The investment is structured as a Sharia-compliant transaction, which is essential in Somalia, where all finance needs to comply with Islamic principles. It has also been designed to allow KIMS to scale its solar business in a measured, risk-managed way and has tranched disbursements and repayment schedules that match the company’s growth curve. Alongside that, Acumen has funded wrap-around support worth $250,000 through technical assistance and grants to help the company build out the platforms needed to grow solar lending, including inventory management, credit systems, and field agent training.
Mustafa Abdi Ali, KIMS Chairman, said: “We are delighted to enter into this partnership with Acumen, enabling us to scale our established off-grid solar business to meet unmet demand for clean and cost-effective energy in Somalia. We appreciate Acumen’s Hardest-to-Reach initiative’s efforts to understand our unique local context and its willingness to co-design an innovative financing structure that not only meets our needs but also advances our mission to bring energy to those who need it most. We are seeing firsthand that the solar systems we are financing are enhancing the productivity and well-being of low-income Somali households. Through this partnership, we look forward to positively impacting thousands more lives.”
Sandra Halilovic, Head of Acumen’s H2R Catalyze, stated: “We are pleased to be entering Somalia by supporting KIMS, a local and well-established company with strong local market knowledge and reach. The solar opportunity in Somalia is significant, and through its initial portfolio, KIMS has found that demand is significantly larger than what it can currently serve, which signaled to us both a strong business case and a deep unmet need. This loan will benefit thousands of Somalis over the next few years and has strong potential for generating broader systems change. H2R is thrilled to support a company founded by Somali entrepreneurs who are at the forefront of driving energy access in the country.”
KIMS was founded 11 years ago by Somali expatriates committed to empowering Somalis to lift themselves out of poverty. KIMS has provided over $45M in financing through more than 46,000 MSME loans since its inception. Recently, it expanded into off-grid solar, recognizing the essential link between energy access and poverty reduction. It has served over 1,000 customers with energy access to date. Operating through its 9 branches, KIMS has a strong presence across Somalia. To learn more, visit kimsmfi.com.