Project: EV Infrastructure Outcome-based financing instrument early-stage design
State of development: Current
Stage of development: Early stage
Stage notes: Early-Stage Design
Type of instrument — Impact Bond: Yes; Outcomes Fund: No; Social Impact Incentives (SIINC): No; Social Impact Guarantee: Yes; Payment-by-results (no pre-financing): No; Technical Assistance and Market-building program: No; Other: 
Rationale for using outcome-based finance: In our discussions over the last 18 months, there is broad agreement that the charging infrastructure is a major obstacle for mass adoption. However, this has not translated into anyone looking at it from the perspective of funding it via more typical infrastructure finance, with no-one focussing on developing the required inclusive strategy and commercial model.

The technology of EV charging infrastructure, together with the OBF solution that we are looking to launch are significant innovations that will deliver the scale of transition necessary to have a significant impact on East Africa's NDC. Once delivered in Kenya, the model will have demonstrated it is commercially viable i.e. outcomes delivered, finance received, and repayment model demonstrated. This will provide the necessary confidence to the capital markets to unlock more traditional debt, climate finance solutions such as green bonds, and large-scale CER transactions. The model can then be replicated across sub-Saharan Africa.
Key challenges to launch: There is undoubted interest in accelerating the mass adoption of EVs across the continent, as demonstrated with many operators now attracting significant capital investment.
 
Given the nascent stage of the sectors growth, the funding approach is following the same pattern as the household solar sector, with equity and short-term asset financing mechanisms the main source of capital. 

What separates the EV sector from household solar is the dependency on an expansive charging network to ensure mass adoption. Such infrastructure is typically financed using longer term, cheaper debt and financiers require a certain level of certainty of repayment. This requires complex modelling. Without early-stage design funding, developing a commercially credible investment case will be challenging, meaning that transition will rely on individual operators attracting investment for their individual plans, inhibiting the speed of transition necessary to support Kenya (and the regions) NDCs.
Social/developmental challenge: "The mass adoption of 2-wheeler EVs is being restricted by the reach and scale of a suitable charging infrastructure. The relatively small 'start-up' EV companies currently in the market are looking to grow the sector independently, all pushing their own technology and charging solutions, with little interoperability across bikes or operators.  This intrinsically limits the mass adoption of the technology.

Without a national charging infrastructure, rapid mass adoption will be challenging. The scale of finance required to deliver the right charging infrastructure, efficiently, and at the necessary scale, requires a single focus on the infrastructure component. This will not be achieved if left to start-ups, whose access to capital is limited. 

The appetite for funding such a charging network exists, but it requires a coordinated strategy of deployment based on a bankable delivery mechanism. An appropriately designed outcome-based financing solution will provide the confidence to finance and deliver said strategy."
Expected intervention model: Longevity Development are looking to design and launch an OBF initially in Kenya that will then act as a catalyst to unlock billions of dollars of commercial infrastructure finance for the development of the urgently required charging infrastructure for the 2-wheeler motorbike sector, across the continent. 

Unlike the 4-wheeler sector, the 2-wheeler market is well placed for rapid migration from combustion powered bikes to e-motorbikes. The prevalent buying behaviour (new purchases rather than second-hand, and vehicle lifespan of 2-5 years), means there is the potential to migrate the existing 12 million+ motorbikes, (forecast to double by 2030), to electric very quickly.

This will dramatically cut carbon emissions, significantly improving air quality, and the incomes and livelihoods of the millions of bike taxi riders who make up the vast majority of users on the continent.
Policy sectors — Employment and private sector development: No; Education: No; Social protection: No; Criminal justice: No; Health: No; Agriculture: No; Environment and climate change: Yes; Water, Sanitation and Hygiene: No; Energy: No; Humanitarian: No; Early Childhood Education: No; Other: 
Primary SDG goal: 8,9,13
Country income classification of beneficiaries — Low-income: No; Lower-middle-income: Yes; Upper-middle-income: No; High-income: No
Notes: Data for this pipeline project was last updated in August 2023
Delivery location: Kenya