Design of a Risk-Sharing Facility for the Off-Grid Solar Sector in Mozambique

Area of Operation: Maputo, Mozambique

Duration of Assignment: December 2021 – December 2022

Name of Client: The World Bank Group

Project Description:

The Mozambique Solar Sector project involved the design of a risk-sharing facility (RSF) in Mozambique to strengthen the capacity of existing firms and attract new firms to deliver affordable and reliable off-grid solar systems (OGS) to rural and deep-rural communities. The RSF was designed to provide partial credit risk coverage to eligible financial institutions for loans extended to creditworthy businesses in the OGS value chain (“OGS businesses”). The RSF was structured as a revolving fund for expanded support beyond the life of the project and follow the World Bank Principles for Public Credit Guarantee Schemes for SMEs where appropriate.

The RSF’s preliminary design features included an initial capital of up to $4 million equivalent, and pricing based on the risk of each participating financial institution (PFIs) if feasible, with charges (guarantee fees) adequate to ensure the facility’s additionality.

Our Services:

  • Estimated the current and projected demand for credit by OGS businesses and guarantees by financial institutions, as well as the volume and value of guarantees that can be provided and the incremental financing that would be generated by the new RSF.
  • Assessed financial institutions’ expectations and willingness to pay to ensure that the RSF design meets their expectations.
  • Identified successful global examples that could be replicated or adapted for the design of the RSF.
  • Recommended options to maximize synergies between the proposed RSF and the existing RSFs operating in Mozambique for the OGS.
  • Reviewed the legal and regulatory framework and prudential standards and identified any regulatory gaps for the successful establishment and operation of the RSF.
  • Proposed options (with pros and cons) for the legal, institutional, and organizational structure for the RSF to enable maximum possible outreach, efficiency, and sustainability.
  • Developed a business model and draft business plan for the RSF.
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