April 23, 2024

Earlier this year, CPI’s Sam Goodman had the pleasure to speak with Grace Fenton Olatunji, Chief of Staff at Nithio. She was part of the proponent team behind Data-Driven Energy Access for Africa, a 2021 Lab instrument that standardizes metrics related to customer repayment risk, improving access to capital for distributors and efficient intermediation of credit and grants to better serve customers.  

What follows is an edited transcript of our interview with Grace.

We really valued coming into the Lab when we did. In 2021, I had recently joined Nithio, and we had closed an initial round of financing to our open-ended vehicle. We were looking to attract more investors to scale our lending.

The Lab helped provide feedback on our approach, bring some standardization, and support us with our messaging. We found it incredibly helpful that we became validated by the Lab to the market as a climate solution and a climate investor, allowing us to continue our fundraising.

Nithio was created to scale investment, initially into the energy access space but, more broadly the climate space. What we did is recognize that a key barrier to scaling financing in climate solutions more broadly is this lack of understanding of credit risk in Africa. We built an analytics approach, what we call our Risk Analytics Engine, which we use to standardize credit risk assessments.

The Engine internally informs our own investments through our lending vehicle FAIR, as well as supports investors in this space with their capital allocation programs, due diligence, and portfolio monitoring. This analytics approach has been critical to how Nithio scales energy access solutions and broader climate solutions.

In terms of impact, our data-driven approach allows us to track impact quite granularly, which has been really helpful and interesting. For example, we can disaggregate impact by things like gender and location, or by size of the product that we are financing.

One of the things that Nithio has been exploring is a gender-financing tranche or window where we would offer a discount rate to borrowers based on the percentage or their breakdown of women customers in their portfolio.

That’s a way we are really hoping to continue to scale impact by looking through a more specific gender lens. We’ve always tracked impact by gender, but really pushing that forward and continuing to expand within the climate space, and broaden our solutions there, too.

We had a fairly holistic approach with the Lab, which was great. I think Nithio is complex when you have the data piece, the blended finance piece, the type of lending we do, and the fact that FAIR is an open-ended vehicle.

We found that the Lab was really helpful in getting a clear sense of our value-add, how to message that, how to fit within this market, and relate to different types of investors. The Lab gave us feedback on the structure and how to communicate it more clearly.

I think that it came at a very helpful time. We had been around for a bit, especially on the analytics side. The Lab helped us scale our investments on both the fundraising and deployment side.

In terms of Nithio’s approach, the risk analytics engine that Nithio developed has been critical to providing a clear understanding of credit risk, again for both for our own investments and to support others, as well as spur more capital into the energy access and broader climate space.

Nithio has built a very innovative approach where we look at customer repayment rates, as well as localized geospatial, socioeconomic, and demographic data to get a very clear sense of the underlying credit risk.

The goal is not to be exclusionary. Because Nithio has a blended finance approach, we need to understand how the right type of capital is reaching consumers and companies based on their risk level. It’s not to say that particularly risky customers shouldn’t have energy access products, but maybe catalytic capital or grant capital is a better tool to reach them.

That momentum has been great in terms of getting to work with a range of a different type of investors, leveraging this blended finance approach. We’re grateful to work with investors who share a common mission and a common purpose to scale energy access across the board with this data-driven approach.

This year, we are continuing to expand, scale, and provide debt to a range of companies across the continent, which is very exciting. We are continuing to see the impact and then broadening our approach. In terms of gender-lens financing, we’ve been discussing a backup servicer approach that would be helpful for the market to ensure continuity of service.

We recently launched our climate vulnerability index, which gives a deeper understanding of where different populations vulnerable to different types of climate change are located across the continent. We are excited to see how we can pair our analytics with our lending-to-scale access to climate solutions.

From our experience working with the Lab, we found the diversity of experience the team brought to support us to be great. We also found the Lab has a wonderful reputation in the space, from their expertise and advice to their ability to connect us with feedback, support, and potential fundraising. The reputational gravitas the Lab added helped validate Nithio’s approach.