BBOXX ceo and co-founder Mansoor Hamayun answers SCI's questions

Q: How and when did BBOXX become involved in the securitisation market?
A: You need to look at the core of our business first, which is around designing, distributing and financing solar systems to improve access to energy across Africa and other parts of the developing world. Since 2010, we've sold 55,000 solar kits and impacted 275,000 lives across 35 countries.

These off-grid systems provide an alternative source of energy. The customer is the priority, so in return for paying a monthly contract between US$8 to US$20 a month, they get the necessary electricity, security and improved quality of life. Our target base is what would be considered the middle class of the population.

It's a growing market, but it is still a niche and the difficulty we have had is in attracting sufficient investment to help finance the business model. Investors have naturally viewed it as a risky option, particularly as it involves developing countries, new untested technology and clients with little or no credit history.

So this prompted us to bring to the market the first securitisation for off-grid solar assets called BBOXX DEARs, short for distributed energy asset receivables. These are contracts - with an average net value of US$300 - given to customers who have brought solar home systems, who then pay it off in installments.

The first issuance of notes was purchased by Oikocredit for US$508,000. The capital we generate from the sales can go to new solar home systems with limited grid electricity and the deal with Oikocredit will benefit an estimated 10,000 people across 24,000 households.

Q: What are your key areas of focus today?
A: We have put an emphasis on the accuracy of our data, since this is one of the key issues. We need to ensure to prospective investors that our customers are going to be reliable with their payments, but they want the evidence before they venture into this market.

We've generated over 12 years of data, which can help investors gauge and tackle any risk. It can show them that the customers have a low probability of default and a good repayment history. Our job is to look at the last 18 months of a customer's history and figure out how to use and present the data.

Q: How do you differentiate yourself from your competitors?
A: On the surface, it's very similar to other solar transactions in the market. With the mechanism, we have taken a mirrored approach to other players such as SolarCity, creating a high yielding, self-liquidating structure.

However, the main difference comes in the detail. We are selling to investors based on the time in the receivables not kilowatts-per-hour.

What they are investing in is what our very long-term predictions are going to be based on the data that we have generated from the customers. We get to these predictions by compacting a number of elements together.

Q: Which challenges/opportunities does the current environment bring to your business and how do you intend to manage them?
A: First, we want to get this current deal rated. The plan is to get it done within the next four to six weeks. But another key thing to note is that the deal was oversubscribed, so there is a clear hunger for this type of market in Africa. The demand has been so good that we need to star considering when the right time is to tap out. We also want to eventually issue listed deals. In this instance, there is going to be some strong consideration on factors such as liquidity and yield, as well as macroeconomic factors.

Q: What major developments do you need/expect from the market in the future?
A: Further issues are most certainly in the pipeline. We are looking to expand issuance progressively, and this starts with a US$10m to US$12m target in 2016. The next deal could be available by March.

However, one hurdle is to start tapping the capital markets and garnering the interest of institutional investors, which is difficult at this infancy stage. The other step is to generate positive talks with the Kenyan regulatory authorities to get a framework where we can eventually get a deal rated and/or listed. The groundwork is underway with these, so it will be interesting to see where we are a little further down the line.

Geographically, there is also nothing to say that this product cannot extend to other third world countries and continents. It's a market that can scale up to the billions with a bit of work. We've set the groundwork in place, so it will be exciting to see how far we can take it.

Outside of securitisation, our plan by 2020 is to provide 20 million people with electricity.

JA