Financing energy SMEs in Ghana and Senegal: Outcomes, barriers and prospects

The article presents the findings of primary research carried out in Ghana and Senegal, which revisited the main assumptions behind the African Rural Energy Enterprise Development (AREED) initiative (2002–2012), and other donor-backed programmes, designed to promote small and medium-sized energy enterprises (energy SMEs). These assumptions were (1) that the lack of affordable local financing presented the most significant barrier to setting up and expanding energy SMEs, and (2) that these barriers would be overcome by a 'demonstration effect' whereby successful businesses, supported by donor-backed programmes, could in turn influence the commercial financial sector to invest in energy SMEs, thus triggering a virtuous circle of growth and profitability. - Highlights: • Analysis of the AREED 'demonstration effect' in Senegal and Ghana. • Commercial financial backing for SMEs remains a serious challenge for entrepreneurs. • Structural issues that increase the financial risk of investing in energy SMEs. • High transaction costs of investing in SMEs. • Longer supply chains and slower pay-back periods for capital-intensive technologies