Market Development Fund in Mozambique

BRILHO’s MDF Results Based Financing (RBF) instrument will avail financial payments available to businesses upon proven, eligible sales of off grid Solar Home Systems (SHS) and Improved Cooking Solutions (ICS). Payments will only be provided to the private sector once sales have been achieved and independently verified. Once payments are received, enterprises are free to use the RBF incentives for whatever activity they deem necessary to develop their business and reach targeted sales. RBF incentives are not intended to subsidize retail prices beyond levels that can be offered sustainably by businesses in the long run. To these ends, RBF within BRILHO’s MDF will apply the following principles:

• Reverse auction approach, which allows businesses to propose the initial RBF base incentive level value, competitively indicating the incentive value businesses consider as needed to engage in the defined markets;
• Flexible RBF model, with incentive levels that can be adjusted in accordance to the market needs and business stage, instead of pre-determining fixed subsidies per company or product, and
• Incentive levels reduce over time to gradually prepare the market for when RBF incentives are no longer available.

The RBF mechanism in BRILHO’s MDF is constructed as a competitive mechanism to accelerate sales growth and delivery of clean energy service solutions that reach underserved markets while facilitating opportunities for productive use.

An interested business can apply for their preferred combination of MDF instruments (Results Based Financing, Catalytic Grants) to a maximum combined value of £1,500,000 per fiscal year (Apr-Mar) to a maximum accumulated total value of £5,000,000 for the Feb 2020- Aug 2024 period. In addition, businesses will be able to apply for specific Technical Assistance according to their needs.

Catalytic Grants

• Catalytic Grant financing is intended to compensate businesses for Capital Expenditures (CapEx) and Operational Expenditure (OpEx) required in support of market combinations of development actions inclusive of, but not limited to Market assessments; Sales and marketing; Revolving funds; Local production/assembling equipment and capacity; Product Development; Skills development and Stock Upscaling.
• Applicants may request up to £1,500,000 in Catalytic Grants over the full duration of their engagement in the programme in the Feb 2020 to Aug 2024 period as based on the following conditions:
  • Total Catalytic Grant value cannot exceed that of the projected total RBF bid placed by the business.
  • Total MDF Financing of the firm (RBF projected and CG) does not exceed £5.0M
  • Catalytic Grants disbursed as advance funding (pre-financing) may not exceed at any point in time a 40% cap on the total approved Catalytic Grants value
  • Applicants are required to match the Catalytic Grants with at least the same co-investment value (1:1) comprised of their own and partner cash and in-kind contribution with the following limitations:
    • Other grant-based development programme financing is ineligible as co-investment;
    • The co-investment must be specifically and directly related to the implementation of the business initiative;
    • The in-kind co-investment can include CapEx and/or OpEx realized from August 2020;
    • The value of the in-kind contribution must be tangible and verifiable, (i.e. based on specific supporting evidence such as contracts, invoices, etc.) so as to be confirmed for eligibility during due diligence;
    • Value of the cash contribution (company or partner) must be at least 10% of the total MDF request.

Technical Assistance (TA)

• Technical Assistance from BRILHO’s MDF is intended to enable businesses to articulate short-term needs associated with developing a bankable and executable market strategy for the business initiative. Available TA services are eligible for provision only to enterprises who are qualified for MDF supports and who have requested support to develop business models, products, plans and/or operational strategies and capacity to either enter the Mozambican market or scale their existing activities within it. TA supports will come in the form of a support package of advisory services via the MDF. TA requests do not form any portion of the RBF or CG funding, and will be procured by BRILHO.

Eligibility Criteria

• Eligible applicants to BRILHO’s MDF can include any manufacturers, import-suppliers, distributors, retailers, installers and/or operators of quality assured energy technologies. Applicants must be able to legally operate in Mozambique. Applicants (Businesses) may include:
  • Private companies,
  • Social enterprises: Including associations, cooperatives, NGOs or similar that operate a venture to generate profits, which are reinvested internally,
  • Partnerships and joint ventures between local and/or international companies and/or social enterprises that carry out activities co-operatively with aims to commercialise eligible energy technologies.
  • Both individual businesses and partnerships that consist of a combination a-c above are eligible to apply.
• Parties meeting the above conditions who are further interested to apply to the MDF for financial support must also evidence the following minimum criteria when placing MDF Bids to be considered accepted for assessment and evaluation:
  • Legally registered in Mozambique (or aiming to do so before the first disbursement takes place);
  • The application is relevant to at least one of the BRILHO eligible technologies;
  • Demonstrated capacity of the business to deliver mentioned products and services in Mozambique, with adherence to processes and procedures outlined by BRILHO (incl. quality standards, capacity to track sales and report these);
  • The products proposed adhere to the quality standards specified by BRILHO and have (or will have) unique identifiers (bar code/serial number);
  • Co-investment: for the Catalytic Grants, the applicant secures a co-investment of at least an equal value to the catalytic grant financing required, including a minimum 10% cash contributions and maximum 90% in-kind contributions. Financial leverage will be one of the factors on which applications will be competitively evaluated;
  • The applicant and partner(s) related to the proposed business are not involved in arms and gambling industries; involved in environmental or human rights abuses or corruption, as will be validated during due diligence.

For more information, visit SNV Netherlands Development Organisation.