The facility leverages debt, including revenue-linked structures, while effectively managing risk and providing critical technical assistance. By doing so, it not only finances early-stage social enterprises but also empowers end consumers to embrace climate-smart technologies. Ultimately, this approach establishes a strong track record, enabling these enterprises to access commercial capital and continue positively impacting the world.
For many startups, a lack of collateral, lower equity cushion, lack of credit history, and other factors hinder them from accessing available credit solutions. Early-stage social enterprises do not fit into the traditional funding models and are difficult to make commercially viable within the existing financial infrastructure.
While government schemes have been introduced to provide a guarantee mechanism for financial institutions lending to startups, they have largely failed to scale due to slow implementation. In addition, no such scheme is targeted specifically toward social enterprises. There is also a lack of understanding of the business value of climate-smart technologies amongst financial institutions and consumers, hindering the scalability of such solutions.
The Impact Financing Facility for Climate Focused Social Enterprises will support innovative climate-smart enterprises with a dedicated component for gender inclusive growth. The goals are to create impact at scale, ensure participation of commercial capital and other private sector players, and demonstrate high financial leverage and replicability of solutions. The facility plans to have a variety of blended finance instruments, bringing together multiple players, such as startups, non-banking financial companies, and retail lending institutions.
The aim of Villgro, the instrument’s proponent, is that within a short credit cycle, enterprises and end-users from this facility build a credit history and raise funds themselves to create impact at scale without accessing this facility.
“Villgro sees blended finance as a crucial step towards improving access to finance to social enterprises developing innovative climate solutions. The Lab’s experience and expertise in designing, testing, and validating blended finance structures will add the needed credibility to our efforts.”
Vibha Sharma, CA, CFA, Impact Financing Lead at Villgro
The proponent aims to support a spectrum of climate tech innovations through the facility, spanning from clean energy to sustainable mobility across rural and urban areas. Each startup solves a fundamental problem and will be tracked accordingly to measure its impact. Potential examples include clean energy-powered farming, cleaner transportation systems, the adoption of waste-to-value technologies for reducing/upcycling waste, and sustainable agriculture practices saving water and land use.