Piloting a Solar Impact Bond for Sustainable Economic Growth in Tanzania
One of our primary goals for The Solar Foundation is to find innovative, sustainable models to fund community led, solar-powered businesses. Achieving this goal will allow us to create a funding flywheel that recoups the funds we allocate so that we can then empower more off-grid communities with solar power and productive appliances. Towards this end, we are excited to launch a new partnership with Change Code to pilot a web3-native Solar Impact Bond based on the social impact bond model that is often utilized in impact investing.
Change Code is pioneering new financial primitives and tokenomics to help make purpose sustainable and profitable. The Solar Foundation and Change Code are collaborating to launch this Solar Impact Bond pilot project, aiming to transform lives in Sub-Saharan Africa through solar-powered, locally based development.
Background
In early 2024, The Solar Foundation partnered with OMAWA Tanzania, a community led NGO which supports and advocates for the needs and rights of orphans and vulnerable children in rural communities, to install a solar microgrid to provide clean power for their school where they teach approximately 800 students. This project replaced kerosene lanterns and diesel generators and resulted in the immediate benefits of reduced GHG emissions, 24/7 clean power access for classrooms, staff houses, and offices, and community phone charging capabilities. The 6.6 kW microgrid project also garnered unexpected benefits for OMAWA including a new revenue stream from local businesses paying to utilize excess power and community-led road improvements. You can read more about this initial project with OMAWA in the Project Section of The Solar Foundation website.
Future Initiatives
Building on this success, OMAWA's executive director, Joseph Maro, proposed solar-powered business ideas to address local challenges including unemployment, food insecurity and a lack of dependable water sources for drinking and irrigation. These proposed business initiatives include:
- Solar-powered irrigation for smallholder farmers
- Expanded phone charging and internet access
- Solar-powered barbershop for skills training and employment
- Solar-powered refrigeration for drinks, ice and food preservation
It is helpful to further understand the benefits of solar-powered irrigation. In Tanzania, only 2.36% of the land suitable for irrigation is being irrigated and the country's reliance on rain-fed agriculture limits productivity and increases the vulnerability of farmers to droughts and the effects of climate change. The smallholder farmers grow green beans, vegetables, maize and french beans but most of the proceeds are used to cover fuel costs. With a solar-powered irrigation system, the cost will decrease and farmers will have more time, money and energy to focus on farming expansion. Reduced water pumping costs and a more reliable water supply will enable farmers to produce more, increase their income and improve their livelihoods.
"With the support of The Solar Foundation, we will prove the sustainability and scalability of these business models that will empower smallholder farmers to use appropriate, cost effective green technology to increase their productivity and income while reducing greenhouse gas emissions and inefficient water usage." — Joseph Maro, executive director, OMAWA Tanzania
The Solar Impact Bond
To fund these community-led business initiatives sustainably, The Solar Foundation is partnering with Change Code to issue a web-3 native social impact bond that we are calling the Solar Impact Bond. Traditional social and development impact bonds include following characteristics:
- Utilizes public-private partnerships
- Funds social services through performance-based contracts
- Attracts private funders (impact investors, philanthropists) to scale high-quality services
- Ensures public sector repayment based on achieved outcomes and public value generation
These impact bonds have been used around the world to fund public health, infrastructure, climate and other innovations. The benefits of using a web3-native social impact bond include increased composability, transparency and openness that will allow for continuous reporting, project flexibility and repayments on a rolling basis.
The Solar Impact Bond project with Omawa Tanzania represents a significant step towards our evolving mission: To sustainably provide full-stack solutions that go beyond initial solar power installation to empower more communities with energy independence and economic sovereignty. By combining solar energy with economic development, the Solar Impact Bond project aims to create a replicable, open-source model, increasing access to solar power and productive appliances for more off-grid communities in Sub-Saharan Africa.
