United Nations Capital Development Fund (UNCDF)

Created by the General Assembly in 1966 to promote economic development, UNCDF began focusing the world’s least developed countries in 1974. Today UNCDF operates in two broad areas: Inclusive Finance and Local Development Finance. UNCDF has also begun work on catalyzing domestic finance for public-private-partnerships geared to stimulating economic growth at the local level.

UNCDF has a unique financial mandate within the UN system. It provides investment capital and technical support to both the public and the private sector. The ability to provide capital financing -- in the forms of grants, soft loans and credit enhancement – and the technical expertise in preparing portfolios of sustainable and resilient capacity building and infrastructure projects, makes its mandate a very useful complement to the mandates of other UN agencies. It also positions UNCDF as an early stage investor to de-risk opportunities that can later be scaled up by institutional financial partners and increasingly by philanthropic foundations and private sector investors.

CleanStart is an innovative approach to scaling up access to sustainable, low-cost clean energy for low income households, implemented by UNCDF and in close cooperation with the Global Environment Facility (GEF). CleanStart supports households and micro-entrepreneurs through microfinance service providers with the goal of enabling over 2.5 million people to benefit from cleaner, more efficient energy by 2017. Currently, the programme collaborates with 18 financial service providers in Asia and Africa to work towards building a sustainable supply chain for energy technologies and services. Over the life of the programme, a total of USD 60 million will have been distributed through lending, with the potential to reduce over 300,000 tonnes of CO2.

The CleanStart programme is delivered through four mutually reinforcing components: (i) finance for clean energy to strengthen capabilities of financial service providers to offer microfinance for clean energy with a technology-neutral approach; (ii) technical assistance to remove barriers to successful technology and financial service deployment; (iii) awareness raising and capacity building of the potential for microfinance to scale up clean energy; and (iv) advocacy and building partnerships to create an enabling policy and business environment to expand microfinance for clean energy. The long-term vision of the Programme is to dramatically scale up energy financing for the poor beyond the initial six least developed countries (LDCs) and also other developing countries with high levels of energy poverty. Its definition of clean energy refers to renewable energy solutions, low greenhouse gas emitting fossil fuels like liquid petroleum gas, and traditional fossil fuels that produce less CO2 emissions through the use of improved technologies like improved cookstoves. CleanStart will identify high to medium potential technologies or services that could be supported through microfinance via initial market research. Ultimately, partner financial institutions will select the clean energy solutions to finance based on their own market research for financial product development.

CleanStart supports partner financial service providers, stakeholders along the supply chain, and end-users to develop scalable business models. Technical assistance is provided, for example, in the form of market research, brokering partnerships, financial product development and roll-out, strengthening supplier capability to market and reliably deliver, install, and maintain technologies and services, and end-user awareness. Financial support can also be provided to partially cover incremental costs involved with clean energy lending to the poor, and aims to leverage an initial investment of USD 26 million with refinancing, energy value chain development, and carbon financing that total USD 49.5 million. Risk mitigation instruments that are offered include pre-investment advisory assistance, risk capital grants, and concessional loans. Research grants and capacity building will be offered to develop training curricula, improve practices going forward, and assess impacts such as on client living standards, poverty reduction, business prospects, and national policies and regulations that promote adoption of clean energy among the poor.