Reaching the Last Mile

Last mile distributors (LMDs) operating in Uganda’s refugee settlements face a range of financial and operational barriers that constrain their growth and limit their potential impact. Co-authored by Mercy Corps and the Global Distributors Collective (GDC), this blog explores key insights into how local energy access businesses perceive these challenges and the strategies they are using to navigate them to ensure that even the hardest-to-reach customers in Uganda benefit from the transformational impacts of sustainable and reliable energy access.

The challenge of energy access for Uganda’s refugee populations

Uganda hosts over 1.9 million refugees and is widely recognised for its inclusive and welcoming policies. Yet, despite this strong enabling environment, communities living in Uganda’s refugee settlements continue to face significant challenges. Chief among them is access to energy. A recent Mercy Corps study on energy access levels in Bidibidi refugee settlement showed that refugees had access to electricity for only five hours a day and that over 90% of households depend on unsafe and polluting cooking fuels such as firewood and charcoal. The consequences are far-reaching: restricted livelihood opportunities, poor health outcomes (particularly for women and children), and accelerating environmental degradation.

But in these challenges lies opportunity: particularly for last mile distributors (LMDs), businesses that primarily focus on selling beneficial products such as solar lights, solar home systems, and improved cookstoves, to underserved customers. According to the Global Distributors Collective’s (GDC) recently launched State of the Sector 2025, 44% of LMDs already operate in displacement or humanitarian settings, a clear demonstration of their willingness and critical role in reaching the most underserved communities. In addition, many refugee-led organisations (RLOs) are delivering energy solutions tailored to the needs of their own communities, and hold significant potential to scale their impact.

Two brand new financing facilities to bridge the gap

To better understand the barriers that energy companies face, the THEA programme – implemented by Mercy Corps, Ashden and the Global Platform for Action on Sustainable Energy in Displacement Settings (GPA) – partnered with the GDC, an international network of over 250 LMDs. Together, we conducted a survey to identify challenges to operating in displacement settings. Building on these insights, we convened LMDs and RLOs for an in-person design workshop in Kampala to co-create technical assistance offerings and financing mechanisms, including a flagship initiative under THEA: the Humenergi financing facility. Humenergi was established as a separate commercial entity with Mercy Corps as the majority shareholder and is currently being incorporated. Beginning in 2026, it will offer concessional loans to off-grid energy companies operating in refugee settlements and energy-focused RLOs.

In parallel, the GDC has launched its Investment Catalyst Facility (ICF) to help unlock debt financing for small and medium-sized distributors. This facility will equip a cohort of GDC members with tailored investment-readiness support, due diligence assistance, and catalytic co-financing. The ICF helps bridge the gap between LMDs and investors by reducing transaction costs, de-risking smaller deals, and strengthening the financial systems that enable locally led distributors to secure sustainable capital.

Both the survey findings and workshop discussions underscored the importance of these new innovative financing initiatives and highlighted the financial and operational barriers that LMDs face in Uganda’s refugee settlements which constrain their growth and limit their potential impact.

The need for concessional finance for working capital

Access to finance remains the most persistent challenge across the sector. According to the GDC State of the Sector 2025, 60% of LMDs identify access to finance as their main obstacle, yet only 24% have successfully secured debt financing over the past two years. The survey findings echoed this: more than 80% of respondents operating in refugee-hosting districts reported difficulties obtaining credit, citing operational and inventory financing as their most urgent needs. Many participants described struggling to meet demand because long procurement lead times make it difficult to keep stock. Meanwhile, even with subsidy schemes in place, verification and reimbursement processes are slow, creating cash-flow gaps.

When asked which financial products would help them scale, 40% of workshop participants prioritised inventory loans, 24% operational expense loans, and 18% preferred grants or subsidies to bridge capital gaps. While grants remain vital for early-stage businesses, participants were also aware of their downsides. “Grants are good when they build capacity,” one distributor reflected, “but not when they replace a functioning market.” When asked about loan terms, participants indicated that concessional interest rates of no more than 10–15% and grace periods of 4–6 months would provide a more sustainable path forward.

A key theme from the co-design process was the need to rethink collateral. Given that refugees cannot legally own land in Uganda, traditional collateral requirements automatically exclude many distributors and their customers. As one participant explained, “Our customers cannot own land, so our assets don’t fit the typical collateral most banks require.” Participants suggested that technology assets, such as solar home systems or clean cookstoves, should be recognised as valid security. This shift could unlock credit for both LMDs and consumers, especially in contexts where land ownership is restricted.

Participants also reflected on the complexities of offering consumer financing. PAYGo models, although designed to improve affordability, often result in high end-user costs and a “poverty premium.” The GDC State of the Sector 2025 report notes that effective annual interest rates can exceed 30%, making energy products more expensive even when subsidies are applied.

Despite these challenges, participants proposed several pathways to strengthen financing ecosystems: blended financial instruments that pair concessional lending with technical assistance to de-risk investment, dedicated inventory financing schemes, and guarantee facilities to ease collateral requirements. They also emphasised the importance of targeted business development support such as marketing assistance, new market identification, and brand-building to help LMDs grow sustainably.

The potential for carbon financing mechanisms to create new revenue streams for LMDs was also discussed. The GDC’s research shows that only 17% of LMDs currently access any form of results-based or carbon-linked finance, reflecting the significant barriers to obtaining these kinds of finance, including: high up-front transaction and measurement, reporting and verification (MRV) costs, complex verification requirements, and the current volatility in carbon prices. Intermediate models should be explored that could unlock carbon value at scale, such as pooled or aggregator approaches, partnerships with experienced project developers, donor-funded MRV, and blended finance that shares early development costs. The GDC’s upcoming report on carbon finance, to be published in early 2026, will explore these options further and identify practical pathways for distributors to benefit from climate finance.

Reshaping the ecosystem beyond finance

Participants of our survey and workshop also highlighted several non-financial challenges shaping the operating environment. A key insight was the need to shift consumer expectations around free handouts. Decades of humanitarian assistance have conditioned many consumers to expect products for free, making it difficult for commercial distributors to enter and sustain markets. The GDC State of the sector 2025 notes that nearly half (48%) of LMDs in humanitarian settings cite consumer willingness to pay as a major barrier. To address this, participants stressed the importance of awareness campaigns that frame energy solutions as investments that enable them to unlock key economic and health benefits. As one participant noted, referencing the widespread use of smartphones in refugee settlements: “If people value products, they will find a way to pay. Sell the value, not the product.”

In addition, participants also pointed to significant gaps in market information and financial literacy. Refugees and host community consumers often lack accurate knowledge of pricing and long-term value, while distributors struggle to access reliable demand data to inform investment decisions. LMDs must therefore invest heavily in below-the-line marketing and sales agents to build trust and stimulate demand; both of which require substantial time and resources. The idea of shared marketing campaigns convened by NGOs was widely welcomed by participants of our workshop, with shared sales agents and warehousing also discussed as having potential to reduce costs.

Finally, consumer trust and product quality emerged as another critical theme. Low-quality or counterfeit products sold by informal retailers have undermined consumers’ confidence, while limited after-sales service and low awareness around functionality and pricing slow adoption. In contrast, GDC members offer a strong counterexample: over 80% of GDC members sell internationally certified products and 83% offer after sales and consumer financing.

Building markets that last

Uganda’s unique refugee model which grants refugees the right to work and freedom of movement creates a strong foundation for market-based approaches to energy access. With a refugee population of nearly two million and many settlements in place for decades, distributors operating in Uganda have sufficient time and market stability to recover investments and scale viable business models. The Humenergi financing facility has the potential to demonstrate how patient capital and tailored technical assistance can unlock sustainable markets for high-quality products, even in the most challenging contexts.

For GDC and Mercy Corps, the workshop reinforced the importance of placing distributors and RLOs at the heart of new financing design initiatives. The challenges and opportunities are clear, calling for stronger partnerships among funders, private sector actors, and development organisations, in order to design financing mechanisms that reflect the realities of LMDs and RLOs. Increased investment in risk-tolerant capital and market-building support will be essential to ensure that energy access in refugee and host communities shifts from short-term assistance to long-term resilience.

If you would like to speak with Mercy Corps and/or the GDC to discuss this blog or working together to achieve shared goals, please contact Megan Taeuber and/or Jessica Utichi.

THEA and the GDC are funded by the UK government through the Transforming Energy Access platform.

This material has been funded by the UK government; however, the views expressed do not necessarily reflect the UK government’s official policies.