Using flexible debt to support capital‑intensive e‑mobility businesses

Abstract

Climate-relevant technologies and business models in emerging markets and developing countries are often pre-commercial and lack operating track record. Climate investments in these contexts typically face high perceived risks, short tenors, and rigid repayment profiles, resulting in under-investment in climate-positive but commercially nascent sectors.

The Kinetic Climate Innovation Facility (CIF), was introduced in 2021 by BII, with the intention of having a highly catalytic, climate-focused investment mandate. The CIF provides catalytic capital on flexible terms with a higher risk tolerance, and in local currency to tailor its support based on the needs and stage of the business. The CIF capital is usually blended with BII core capital to make pioneering investments. This allows companies to test, seed, and scale cutting-edge technologies or unproven business models with the potential for transformational climate impact and market-building in Africa, Asia and the Caribbean.

This shows that catalytic capital can be used in many different ways, including offering debt on flexible terms to help early-stage companies test and scale climate innovations, and by reducing capital risk to mobilise private investment in emerging markets.

Context and challenge

Electric mobility in emerging and developing economies promises cleaner urban transport, lower lifetime operating costs and important industrial opportunities. Yet, the business models that deliver these benefits (e.g. electric bus concessions, commercial two‑ and three‑wheeler electric fleets, and networks of charging infrastructure) are highly capital‑intensive and usually have negative cashflow during deployment and ramp‑up. While fixed costs such as vehicles, batteries, depots and chargers require large upfront expenditure, revenues instead grow gradually as routes are tendered and customer bases expand. Conventional bank finance in many markets is therefore a poor fit. Debt tenors are short relative to asset life, pricing is high for the risk profile, collateral requirements are onerous, and lending is frequently in hard currency even when revenues are earned in local currency. Lenders also fear technology, policy and counterparty risks, and they have concerns about battery degradation and residual value, tariff-setting and fare collection, as well as the reliability of public off-takers. The result is a persistent tenor and risk mismatch. Equity is often not enough and viable projects stall before they reach scale, making traditional financing tools a suboptimal option.

Approach

The British International Investment’s (BII) Kinetic Climate Innovation Facility (CIF), launched in 2021, offers a solid solution to the above constraints. It was designed to test, seed and scale climate solutions in segments where traditional finance is scarce or inflexible. Among the different products it offers, the CIF leverages a dedicated flexible debt product that has higher risk tolerance and flexibility on tenor, seniority, currency and repayment profile. Aligned with the OECD DAC Blended Finance Principles, it provides a clear rationale for any concessionality, defined graduation pathways to commercial capital, market‑reinforcing structures, and high standards of transparency and governance.

The flexible debt deployed by the CIF implies that:

1) Loans or other debt instruments provided are structured around the actual variable cashflow profile of e-mobility businesses rather than forcing projects to fit a standard corporate loan;

2) Longer principal grace periods and maturity are offered, which bridge procurement, commissioning and the first months of operations;

3) Amortisation follows expected revenues so that debt service steps up as utilisation and collection efficiency improve;

4) Local currency lending or hedging is prioritised to align debt service with local currency revenues, thus avoiding foreign exchange risks overwhelming otherwise sound projects;

5) Operational covenants focus on performance metrics like fleet availability, load factors and fare or lease collections, so any underperformance is evidenced early and can be corrected.

We look at two BII investments made through the CIF to illustrate how flexible debt removes binding constraints at different points in the value chain: BasiGo’s electric buses in East Africa, and Loadshare’s commercial electric two-wheelers in India.

BasiGo, a sustainable mobility company, procures and provides affordable e-buses to public transport operators in Kenya and Rwanda. BasiGo’s pay-as-you-drive (PAYD) is a system where the operators are charged based on mileage, i.e., operators pay only if the bus is operating. The leasing model removes operators’ high upfront cost and allows them to pay BasiGo directly from cash flows as they operate. When BII first invested in 2023, the company had deployed 19 e-buses but still needed to prove the unit economics of the PAYD model to scale into a sustainable business. Commercial banks were unfamiliar with e-buses as an asset class and, with no secondary market, were reluctant to finance direct purchases by operators. BII provided an initial USD 5 million loan in 2023 and a follow-on USD 7.5 million loan in 2024. This funding allowed BasiGo to shift from importing fully assembled buses to local assembly of e-bus kits at greater volumes, reducing per unit costs. Disbursements were tranche-based and linked to BasiGo raising matching equity, which kept leverage manageable and signaled discipline to future investors. Early success in Kenya enabled a four-bus pilot in Kigali, Rwanda. There, a centralised “tap-and-go” fare collection system let BasiGo link lease payments directly to fare inflows, reducing cash-handling risk. The Kigali pilot covered more than 70,000 kilometers without unexpected breakdowns or service interruptions – an important proof of demand, reliability, and service quality. By March 2025, BasiGo had expanded its fleet to 55 e-buses, improving local air quality and avoiding an estimated 1,611 tons of CO₂ compared with diesel buses. In Kenya, operator earnings had increased by at least 20%. Credibility from BII’s flexible debt helped crowd in additional finance: BasiGo closed USD 14 million of new money in its Series A and secured a commitment for USD 10 million in additional debt from the U.S. Development Finance Corporation. With scale, BasiGo reports positive gross margins on PAYD and demonstrates a clearer path to commercial funding which is consistent with the facility’s objective of helping investees graduate from concessional to market terms.

Loadshare, a logistics provider working with major e-commerce platforms, addresses last mile logistics in India through leasing of electric two-wheelers (E2Ws) to riders. However, high upfront battery costs and lender skepticism have constrained growth. Non‑bank finance companies (NBFCs) were quoting 18-28% interest on EV leases (almost double the 10% typical for internal combustion engine - ICE - vehicles) making leasing uneconomic for many riders and operators. Loadshare’s model leverages India’s battery swapping infrastructure to remove the upfront battery purchase, cutting the sticker price of an E2W in half. Although renting the battery adds a small daily cost, the total per‑km cost can be as low as 1.25 rupees (around half that of an ICE two-wheeler), improving rider profits and creating new jobs. BII extended a USD 5 million flexible debt facility with a grace period and three disbursement tranches linked to milestones and repayment capacity. The structure derisked the pilot phase and enabled course corrections without triggering default. Overall, risk tolerant capital proved that the model was successful and adoption accelerated: more than 1,800 E2Ws were deployed (800 financed through the CIF), and NBFCs subsequently offered EV financing at materially lower rates. Loadshare plans to expand to 4,400 EVs, with expected annual emissions reductions of more than 4,880 tons of CO₂ equivalent.

Outcome and implications

Flexible debt is a method for matching capital to the growth curve of climate businesses. Across both cases, flexible debt works by aligning repayment to the rhythm of operations and by absorbing early stage risks that traditional private lenders will not. The approach increases maturities towards asset life, reduces refinancing risk and preserves liquidity during deployment and ramp-up. It also creates a track record, whereby the operational and financial data generated on reliability, utilisation and collections provide lenders with the evidence they need to price risk. Finally, tranche-based disbursements and performance-linked covenants preserve credit discipline and align incentives.

The demonstration effect is visible: BasiGo’s subsequent equity and debt increased substantially and so did the willingness of NBFCs to finance Loadshare’s riders at lower rates. This clearly points to a credible path from concessional to commercial capital as scale and data accumulate.

For policymakers and development finance providers, the implication is that instrument design matters as much as price, if not more. Flexible debt - especially in local currency and supplemented by measured credit enhancement - can open the door to new asset classes by addressing real constraints such as tenor, ramp-up, foreign exchange mismatch and perceived technology or policy risk. Yet, finance is not a substitute for fundamentals. Predictable fare and tariff frameworks, clear procurement rules and credible off-takers are necessary complements. Where enabling conditions are present, flexible debt helps to create investable pipelines and, over time, supports capital market takeouts such as GSS bonds or securitisations that recycle scarce catalytic capital into new projects.

The CIF model can be replicated by other donors and development finance providers by establishing dedicated catalytic windows with clearly articulated risk mandates, explicitly designed to operate ahead of commercial markets and to crowd in commercial capital over time. The catalytic capital can be deployed through portfolio-based approaches to diversify risks across multiple early-stage investments while generating comparable data sets that can accelerate market learning. Scaling of the model could be co-ordinated across donors and other providers to avoid fragmentation and align financial instruments around the same market-building objectives.

Further information

How can flexible debt support capital intensive e-mobility businesses? - British International Investment

Kinetic - British International Investment

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