Introduction:

Enterprise services is about helping to ensure that the champion is well-equipped to pick up the technology and the financing and use them to create a viable and thriving business. In the presence of more relaxed collateral requirements, the extra time and resources spent on service provision help to guarantee the success of the business and help enablers better get to know the personality of the entrepreneur with whom they are dealing. The term "enterprise services" is a broad one and can cover technical training, business planning, even advice on operations and book-keeping. Some services are delivered before the business receives investment and commences operations and other may continue many years after the initial start-up phase.

E+Co has identified the following areas as representative of some of the services that are most in demand.
  • Technology-related training
  • Verification of whether the technology is available, affordable and appropriate for target customers
  • Assessment of market potential and segmentation of the market
  • Business plan development and evaluation of competing alternatives
  • Estimating carbon monetization potential
  • Risk identification and mitigation
  • Financial modeling
  • Structuring, evaluating or arranging co-financing and next-stage financing
  • Organizational/ownership structuring and management planning
  • Creation of legal agreements, regulatory/Central Bank compliance
  • Adherence to business plan, monitoring of cash flow
  • Operational problem resolution and systems improvement
  • Book keeping and accounting
  • Monitoring and Evaluation of financial, social and environmental returns

E+Co has developed expertise in delivering all of these different types of services to business-minded champions. The result, however, comes at a cost. In earlier years, E+Co has spent more than 100% of the amounts it was investing in service provision. With time and learning-by-doing, this cost has steadily declined. In 2008, the cost of service provision was approximately $0.30 of each $1.00 invested.

Compare this, however, with the data from the microfinance sector. For years, $0.15 of transaction cost was required in order to lend $1.00, but now the best performing microfinance institutions are performing well below that. ASA in Bangladesh has reduced its transaction costs as low as $0.03 on the dollar. These sorts of standards, however, are entirely unrealistic for the clean energy SME sector at this stage in time, and this for several reasons:
  1. "Clients" are more dispersed
  2. Their businesses are more complicated and require greater amounts services and/or due diligence meaning each investment officer completes fewer deals
  3. Those services and/or due diligence in turn require more skilled investment officers
  4. Interest rates and terms that are affordable to the businesses being funded are much lower and longer than those provided in the micro-finance sector, partly because of the nature of the businesses and their cash flow; they simply cannot afford to pay more in many cases.

On the other hand, transaction costs anywhere in the neighborhood of $0.20 - $0.60 on the dollar, while more expensive than microfinance, represent a least cost option in delivering modern energy services to the under- and un-served. In E+Co's experience, for example, modern energy can be delivered to one person for $5.30, or:

  • $1.22 in subsidy (soft cost of service provision to entrepreneur) (23% of $5.30)
  • $4.08 in E+Co investment (77% of $5.30)

In addition, E+Co's investment will leverage 9.7 times the amount capital from 3rd parties (owners, investors, and other lenders). For each person served, this equals $39.58.