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FAO/UNEP/UN-Energy Bioenergy Decision Support Tool -
MODULE 7: Deployment and Good Practices
Box 8: African Rural Energy Enterprise Development (AREED) initiative
UNEP and partners have run the African Rural Energy Enterprise Development (AREED) initiative for the past eight years. The main
goal of AREED is the development and scale-up of an enterprise-led approach to delivery of clean energy services in peri-urban
and rural communities of Tanzania, Zambia, Ghana, Senegal and Mali. The purpose is to deliver cleaner energy services to the poor
“beyond the grid.” More than US$1.4 million has to date been invested in about 40 clean energy small and medium enterprises
(SMEs) serving about 400,000 rural households. Although only a few of the investments include bioenergy, many lessons learned are
relevant, especially for off-grid and rural development goals.
Main lessons: Program Level
• All actors involved (donors, UN, multi-nationals, agencies) must be committed to the long term fnancial viability of the clean
energy enterprises they seek to support. SMEs that fail to meet economic, social and environmental sustainability criteria are a
drain on scarce resources and cannot contribute to economic growth, poverty reduction and sustainable development.
• Grant funding will never be suffcient to cover the programmatic and capital investment costs of achieving universal access to
clean energy services in low income countries. Organizations involved in SME support programs must have a fnancially viable
business model that can be scaled up using local capital and local capacities as much as possible. The business models
should include new partnerships with national and international fnancial institutions to create incentives and capacity to facilitate
increased investment in clean energy SMEs.
• The most effective partners in AREED and the broader SME development sector are those that are themselves adopting the
core entrepreneurial instincts and practices needed to recognize business opportunities and start and manage a business.
Public servants and NGO engaged in SME development are most effective when they follow business-like approaches such as:
assessing and mitigating risks; knowing the market for clean energy business development services; offering services that match
enterprise needs; and developing, testing and replicating least-cost service solutions for clean energy enterprises.
• Corporations with a strong corporate social responsibility agenda can support energy SME growth as a reliable source of
additional skills, knowledge and networks. These additional resources can go a very long way in complementing the ‘traditional’
grant-funded programs.
• Program effectiveness can be improved by integrating knowledge sharing/exchange with other programs into the designs; such
cross-platform learning has proven successful in AREED. For instance, a toolkit for entrepreneurs developed jointly by AREED
staff and external training experts in English was translated and feld-tested into French and Spanish for use in Africa and Central
America, respectively. As a result, the learning curve was shorter, the costs lower, and the information disseminated faster
outside the Anglophone community.
• Enabling policies and appropriate government support are crucial for scaling up of SMEs.
Main Lessons: Project level
Identifying a ‘good entrepreneur’ is crucial to building energy SMEs. A good entrepreneur is one who is willing to invest his/her
own money and a signifcant portion of time to turn a viable core idea into a successful enterprise and a full-time opportunity. An
entrepreneur investing cash and “sweat” equity is less likely to walk away when the going gets tough.
• The level of enterprise development assistance to provide and the amount of “handholding” provided must be matched to the
entrepreneur’s experience, business track record and skill set. In assisting with business planning and due diligence, especially
in decentralized enterprises, the main focus should be on understanding the market and using the knowledge gained to build
effective marketing strategies and tactics for the enterprise.
• Effective communication with the entrepreneur is essential, both before commencing business development assistance and
throughout the duration of enterprise development work. Almost every enterprise will continue to require some form of assis-
tance during the frst few months; such “post-investment hand-holding” is often necessary to ensure that implementation
proceeds according to the approved business plan and that the enterprise is positioned to grow.