The Impact Investors’ Blind Spot: Local Clean Energy Entrepreneurs in Kenya

Impact investment aiming at generating both financial and socioeconomic returns is critical to achieve universal energy access. Off-grid energy access companies have absorbed about US$1.7 billion worldwide in disclosed investments in the period 2010 to 2018. The pace of investment has accelerated in the last few years. At the same time, impact investors have been criticized for investing only in foreign-owned companies and not local entrepreneurs, particularly in Africa.

Impact investors are being criticized for bias, and demands are increasing that they change their patterns of investing. Impact investment managers tend to come from developed countries and prefer to invest within their network. A recent report from Oxfam has argued that impact investors ignore impact criteria and disproportionately invest in companies that can provide financial returns, across all sectors. Critical voices from within the industry (including a Village Capital report) suggest that investors should have greater local engagement, modify their investing criteria, and invest in what entrepreneurs need.


  • Impact investors have been criticized for investing mainly in foreign-owned clean energy access companies and ignoring local entrepreneurs in Africa. This working paper looks at the investments made by impact investors in clean energy access in Kenya, which has been the hub of renewable energy access investment in Africa.
  • Impact investors have almost exclusively invested in companies developing pay-as-you-go solar home systems (PAYG SHS) and in mini-grid technology. This approach appears to be guided by the expectation that these business models, which allow consumers to pay for electricity in small amounts, will grow rapidly to provide electricity to millions of people across the continent.
  • Local Kenyan-origin entrepreneurs have been building different types of businesses that focus on distribution of products and implementation of clean energy systems. These businesses are growing at a slower pace than PAYG SHS and mini-grids, but several of them are profitable and create positive socioeconomic impact.
  • Given their growth trajectory, local entrepreneurs can absorb relatively modest amounts of capital and deliver a positive return to investors.
  • Current impact investors who invest equity cannot meet the needs of local entrepreneurs because they are incentivized to invest large amounts of capital in investments that can generate higher returns on exit. We therefore recommend the creation of a debt fund that can make relatively small individual investments.

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