EXPLAINER: How Koko Networks worked and why it suddenly collapsed

The sudden shutdown of KOKO Networks sent shockwaves across Kenya, catching both employees and customers completely off guard.

Hundreds of staff members were left reeling after the company abruptly halted operations, with many learning of the decision without warning, plunging livelihoods into uncertainty and bringing to an end one of the country’s most ambitious clean-cooking ventures.

The impact extended far beyond KOKO’s workforce. Hundreds of thousands of customers woke up to find a service they depended on abruptly unavailable.

For many households and small businesses, the closure meant an immediate disruption to an essential daily need — cooking fuel.

Sources estimate that up to 1.5 million households across Kenya relied on KOKO’s ethanol fuel as a cheaper, cleaner alternative to charcoal and kerosene.

According to sources familiar with the matter, the decision to shut down followed two days of intense internal meetings at the company’s Nairobi offices.

Once the call was made, the shutdown was swift and total. Fuel distribution stopped, thousands of automated refill machines were switched off, and staff were instructed not to report to work.

The closure was communicated through mass text messages sent to employees and customers on January 31.

KOKO Networks was not a small or fragile startup. Founded in 2013, the company had grown into one of Kenya’s most visible clean-energy enterprises, operating more than 3,000 automated ethanol dispensing machines across urban and peri-urban areas.

Over its lifetime, KOKO raised more than US$100 million in debt and equity from major international investors, including Verod-Kepple, Rand Merchant Bank, Mirova, and the Microsoft Climate Innovation Fund, with backing also linked to World Bank-aligned institutions.

That level of financial support reflected strong global confidence in clean cooking as both a development and climate solution, as well as in carbon markets as a way to bridge affordability gaps in emerging economies.

KOKO positioned itself at the intersection of these trends, presenting a model that promised to tackle deforestation, indoor air pollution, and energy poverty simultaneously.

At the core of KOKO’s operations was a business model built around carbon credits, certificates issued for verified reductions in greenhouse gas emissions.

By encouraging households to switch from charcoal or kerosene to bioethanol, KOKO reduced carbon emissions and earned carbon credits for every tonne of emissions avoided.

These credits were then sold on international markets to companies seeking to offset their own emissions.

Revenue from carbon credit sales was used to heavily subsidise both fuel and cookstoves for low-income households.

Ethanol refills were priced from as little as Sh30, making them significantly cheaper than charcoal in many urban areas.

Cookstoves were sold for about $12 (Sh1,500), far below the market price of roughly $115 (Sh13,000).

This pricing strategy allowed KOKO to scale rapidly, embedding its fuel into daily life for millions of Kenyans.

The fuel became a staple in many low-income households, praised for its affordability, efficiency, and environmental benefits.

Beyond cost savings, ethanol reduced indoor air pollution, a major contributor to respiratory illness, particularly among women and children.

The shift away from charcoal also supported forest conservation efforts by reducing demand for wood fuel, a leading driver of deforestation in Kenya.

However, the entire model rested on one critical regulatory approval; a Letter of Authorisation from the Kenyan government.

The letter allowed KOKO to sell all carbon credits generated by its operations on international markets. Without it, the company could not monetise the emissions reductions that financed its subsidies.

Sources say the government’s refusal to issue the authorisation became a single point of failure for the business.

Once the letter was denied, the impact was immediate and severe. Without access to carbon credit revenues, KOKO could no longer sell fuel and stoves at subsidised prices.

Executives concluded that the company would be unable to meet its financial obligations, forcing a shutdown.

The decision to close followed days of internal deliberations, as management weighed whether operations could continue under any alternative financing arrangement.

Ultimately, the conclusion was that without government approval to sell carbon credits, the business was no longer viable. Staff were informed of the closure on Friday and instructed not to report to work, according to multiple sources.

The shutdown affects more than 700 direct employees, including engineers, logistics staff, customer service workers, and corporate teams.

Thousands of agents who operated KOKO’s extensive distribution network are also impacted, losing a critical source of income. For many, the sudden halt has left little time to prepare for the loss of jobs and commissions.

Beyond employment, the closure raises broader concerns for Kenya’s clean-energy transition. An estimated 1.5 million households that had adopted bioethanol as an alternative to charcoal and kerosene now face uncertainty over their cooking options.

Energy experts warn that many households may revert to charcoal, potentially reversing gains in forest conservation, public health, and emissions reduction.

KOKO’s collapse also highlights the vulnerabilities facing climate-dependent business models in emerging markets, particularly those reliant on regulatory approvals and international carbon markets.

While carbon credits have been promoted as a tool to finance climate solutions in low-income settings, the KOKO case underscores how policy decisions can abruptly reshape the viability of such ventures.

Once hailed as a flagship example of how private capital could support climate action and development goals, KOKO Networks’ abrupt shutdown has left customers stranded, workers jobless, and investors nursing losses.