The Seed Capital Assistance Facility (SCAF) is a new initiative operating across Asia and Africa. The facility is aimed at helping energy investment funds provide seed financing to early stage clean energy enterprises and projects. The Facility is implemented through the United Nations Environment Programme, the Asian Development Bank and the African Development Bank.
Entrepreneurs can transform markets, but the environment for entrepreneurship is poor in many developing countries, particularly in the energy sector. For new business ventures there is a lack of available enterprise development support services and seed financing is hard to secure, with most investors reluctant to engage too early. This means that even high potential renewable energy and efficiency sectors develop quite slowly.
The two largest challenges that investors have in providing seed capital financing to early stage projects and companies are the higher transaction costs and insufficient returns offered by these small, less mature and more risky ventures. The SCAF facility is designed to address these two hurdles, offering investment fund managers two types of cost-sharing support for those willing to include a seed investment window within their overall investment strategy.
By sharing transaction costs and bridging the gap between returns offered by local sustainable energy entrepreneurs and those required by the investment community, SCAF helps to:
- Provide entrepreneurs with the enterprise development services and early stage risk capital they need to develop sustainable energy businesses and projects;
- Increase the scale and scope of clean energy investment opportunities available to commercial financiers; and
- Increase capital mobilisation into the clean energy seed finance sector.