PUE Refrigerators: Stock financing
Summary
This very short article summarises key things for last mile distributors (LMDs) to consider when financing the purchase of productive use of energy (PUE) refrigerators, and what manufacturers can do to support distributors.
The challenges of accessing finance for LMDs
Access to finance has consistently been reported as one of the largest challenges among LMDs of all sizes.
Specific challenges include limited availability of local debt financing, collateral requirements and unfavorable interest rates.
Considering that many PURE technologies are still considered too risky by financial institutions, securing the necessary capital to purchase an inventory of refrigerators is often difficult for LMDs.
In addition, LMDs that import PURE appliances also face challenges that arise from volatile foreign exchange rates as stock often loses value between import and sale (GOGLA, 2023).
When piloting refrigeration sales, LMDs may be able to purchase small numbers of fridges using their own cash or through small grants.
Munyax Eco has received small grants from Efficiency for Access and NGOs in Rwanda. Procuring small numbers can however be a challenge if manufacturers require minimum order quantities.
When distributors transition to scale, they should assess their working capital requirements. Based on their sales pilot data on conversion rates and repayment periods, LMDs can calculate whether the forecasted additional revenues from the sales of refrigeration is sufficient to maintain an inventory.
At this point, LMDs might also qualify for results-based financing (RBF) programmes. Several GDC members selling PUE appliances have successfully raised RBF but they are typically larger with average revenues exceeding $350,000.
What can manufacturers do?
When LMDs are new to suppliers they will often be required to pay upfront. One of the reasons distributors find procurement of PUE appliances more challenging than other off-grid products such as solar lanterns, is because these manufacturers are generally new players and still working out the logistics side of their own business.
Manufacturers and suppliers are requested to ensure they produce or supply sufficient products to meet the growing demand of LMDs.
Solar Sister, for example, reported that one of their suppliers constantly had issues with keeping solar irrigation pumps in stock. This meant their customers would have to wait for a couple of weeks before they received their product.
Keep reading
Read more about selling PUE refrigerators:
- Consumer demand and value proposition
- Sales and marketing
- Product and supplier selection
- Consumer finance
- Logistics
- After-sales support
Read our full publication
Want to learn more? The above articles have been taken from our downloadable publication: How to Sell Refrigerators for Productive Use.
Photo credits
Top graphic: Contains the following edited images: photo of a woman by Freepik; fridge photo by muhammad.abdullah on Freepik; and milk carton icon by macrovector on Freepik
First photo: Image by Freepik