In Lusaka, Zambia Vitalite Zambia Limited and the UN Capital Development Fund (UNCDF) have entered into a financing agreement. Through this agreement, UNCDF will partially support Vitalite Zambia to purchase inventory for development of their solar Pay-As-You-Go business in Zambia. These include solar home systems (SHS), clean cookstoves and other products which enable Zambia's citizens who are not connected to the national electricity grid to access clean and reliable energy. The two-year loan facility was availed and will be repaid in local currency, amounting to ZMW 4,600,000 (US$250,000). This reduces the foreign currency exchange risk for Vitalite, which further enhances the financial viability of the business and affordability of its energy products.

Over 70 percent of Zambians, about 12.6 million people, are not connected to the national electricity grid, forcing them to turn to environmentally-harmful sources of power such as charcoal and wood to meet their energy needs. Burning charcoal or wood also has harmful health effects and because this fuel must be collected, it takes productive time away from women and children, thus perpetuating their poor living conditions. With clean energy such as solar power and clean cookstoves in the home, families are able to light their homes and prepare their meals without harmful fumes and spending long hours collecting firewood or buying charcoal.

Vitalite Zambia is committed to providing clean energy solutions to Zambians in rural and urban areas. Operational in Zambia since 2013, Vitalite has offered a variety of solar products and cooking solutions that range from simple lighting solutions to solar home systems that can power radio, television, phones and lights. Customers pay for their product package through digital finance methods using a PAYg model. Thus, Vitalite is able to meet energy needs and increase access to digital payments throughout Zambia.

In 2020, Vitalite was poised to scale its agent network, by hiring more agents and opening more customer service centres to reach the last mile. However, due to the impact of the COVID-19 pandemic, lockdown measures were put in place and the Zambian currency, Kwacha, depreciated against other major currencies, making the cost of imported home solar systems and other equipment significantly more expensive than initially projected. This impacted the cost at which Vitalite could offer their products and impacted the cost of any financing Vitalite could secure. Vitalite necessarily responded to the kwacha depreciation by increasing the price of the products, but with an awareness that price increases in a price sensitive market have an adverse impact on the size of addressable market, given the customers are generally low-income earners who are challenged by these higher prices.

Russell Lyseight, Vitalite Zambia Managing Director said:

‘The funding from UNCDF will help us to confidently secure high-quality inventory for onward distribution to our rural customer base, while in a wider sense supporting our efforts to respond positively to the array of COVID-related impacts our organisation experienced during 2020 and 2021.’

The ZMW 4,600,000 is part of the Inclusive Digital Economy Energy programme, supported by UNCDF’s LDC investment platform, which leverages UNCDF’s unique and innovative capital instruments to make financing available for Least Developed Countries (LDCs) and support the development of innovative interventions in various sectors, including clean energy. It demonstrates UNCDF’s ability to adapt to local market needs by providing financing in local currency, among the first of its type in Zambia. This will potentially have a demonstrative effect on local and international financial institutions on opportunities in the energy PAYGO sector and viability of its enterprises, and has potential to encourage other financial institutions to offer similar facilities.

With a competitively structured loan facility available in local currency, Vitalite is able to better manage its inventory levels and growth plans. Financing a local business that provides a critical utility to under-served Zambians is important to UNCDF as it keeps people earning incomes and meeting their daily needs.

Isaac Holly, UNCDF Country Lead said:

This new collaboration with Vitalite through the loan is ground-breaking for our work in Zambia as it introduces a new financing facility to the market that will enable us to continue building digital economies and deepening digital inclusion. It also enables us to support access to clean energy, which we know is critical to meet our climate goals. Lastly, supporting businesses like Vitalite during challenging times is critical for Zambia’s economy because small and medium-sized businesses drive the economy. Helping them remain operational and grow is vital to strengthening the economy.

This loan facility demonstrates the one of several instruments UNCDF implements to support government’s efforts at digital inclusion and economic growth and to ensure no-one in Zambia is left behind in terms of development and digital inclusion. In addition, the new collaboration with Vitalite is one part of UNCDF’s overall efforts to support the use and access to clean energy solutions for many Zambians. UNCDF is exploring other partnerships with capable organisations rolling out clean energy solutions across Zambia.