Difference between revisions of "Venture Capital for Financing Hydropower"
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| + | = Definition = | ||
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Venture capital is a type of private equity that refers to equity investments made, typically in less mature companies, for the launch, early development, or expansion of a business. Venture investment is most often found in the application of new technology, new marketing concepts and new products that have yet to be proven. | Venture capital is a type of private equity that refers to equity investments made, typically in less mature companies, for the launch, early development, or expansion of a business. Venture investment is most often found in the application of new technology, new marketing concepts and new products that have yet to be proven. | ||
Venture capital is a very important source of funding for startups that do not have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns. | Venture capital is a very important source of funding for startups that do not have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns. | ||
| − | ''Definition by [http://www.investopedia.com/terms/v/venturecapital.asp Investopedia] ''<br> | + | ''Definition by [http://www.investopedia.com/terms/v/venturecapital.asp Investopedia] ''<br> |
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| + | = Venture Capital for Financing Micro-Hydro in Rwanda (GTZ Case Study) = | ||
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| + | In the project, “'''PSP Hydro'''” 6 Rwandan companies are being awarded a 50% subsidy to build and operate 6 micro-hydro plants and mini-grids supplying rural areas with electricity. So far 5 projects are in process of preparation and implementation. In preparation of the '''PSP Hydro II''', possible future finance instruments and mechanisms have to be identified. Many instruments are already available to project developers and it is recommended to include venture capitalists early in the selection procedure of new project developers. | ||
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| + | == Financial institutes and available instruments for micro hydro == | ||
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| + | The traditional financial sector in Rwanda is composed of: | ||
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| + | *a national bank (Banque National de Rwanda, BNR), | ||
| + | *a development bank (Banque Rwandaise de Developpement, BRD), | ||
| + | *a housing bank (Rwanda Housing Bank, RHB) and | ||
| + | *six commercial banks (BCR, BCDI, BANCOR, FINA BANK, COGEBANQUE, BK). | ||
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| + | Two years ago three parties started within the banking sector to offer leasing products (BRD, BRC and BK) and they formed the leasing association of Rwanda. Also guarantee mechanisms are in place: the African Solidarity Fund (ASF) operates from Niger and the African Guarantee Fund and Economic Cooperation (FAGACE) operates from Benin. | ||
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| + | Further, two venture capital funds to support the private sector have been recently opened their doors: Rwanda Enterprise Investment Company ([[REIC|REIC]]) and [[GROFIN|GROFIN]]. They both had contacts with project developers. | ||
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| + | It can be summarized that the PSP Hydro contributed to the situation that micro hydro is now considered by the majority of the financial institutions as a finance possibility. All agreements to the project developers are still at an early stage, some disbursements have been made, and therefore it is too early to indicate whether in future it will be considered a good finance opportunity. At this stage, conditions offered to project developers in micro hydro are in line with long term finance conditions in other segments of the economy. | ||
Revision as of 12:14, 21 June 2009
Definition
Venture capital is a type of private equity that refers to equity investments made, typically in less mature companies, for the launch, early development, or expansion of a business. Venture investment is most often found in the application of new technology, new marketing concepts and new products that have yet to be proven.
Venture capital is a very important source of funding for startups that do not have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns.
Definition by Investopedia
Venture Capital for Financing Micro-Hydro in Rwanda (GTZ Case Study)
In the project, “PSP Hydro” 6 Rwandan companies are being awarded a 50% subsidy to build and operate 6 micro-hydro plants and mini-grids supplying rural areas with electricity. So far 5 projects are in process of preparation and implementation. In preparation of the PSP Hydro II, possible future finance instruments and mechanisms have to be identified. Many instruments are already available to project developers and it is recommended to include venture capitalists early in the selection procedure of new project developers.
Financial institutes and available instruments for micro hydro
The traditional financial sector in Rwanda is composed of:
- a national bank (Banque National de Rwanda, BNR),
- a development bank (Banque Rwandaise de Developpement, BRD),
- a housing bank (Rwanda Housing Bank, RHB) and
- six commercial banks (BCR, BCDI, BANCOR, FINA BANK, COGEBANQUE, BK).
Two years ago three parties started within the banking sector to offer leasing products (BRD, BRC and BK) and they formed the leasing association of Rwanda. Also guarantee mechanisms are in place: the African Solidarity Fund (ASF) operates from Niger and the African Guarantee Fund and Economic Cooperation (FAGACE) operates from Benin.
Further, two venture capital funds to support the private sector have been recently opened their doors: Rwanda Enterprise Investment Company (REIC) and GROFIN. They both had contacts with project developers.
It can be summarized that the PSP Hydro contributed to the situation that micro hydro is now considered by the majority of the financial institutions as a finance possibility. All agreements to the project developers are still at an early stage, some disbursements have been made, and therefore it is too early to indicate whether in future it will be considered a good finance opportunity. At this stage, conditions offered to project developers in micro hydro are in line with long term finance conditions in other segments of the economy.
