How can we overcome challenges : what's next ?
Dear Participants, Since this morning we have heard a lot of good and in-depth analysis on the barriers for MFIs to enter the energy space. A number of issues have been discussed at length, and it seems there is a consensus on where the largest problems lie: behavioral change, access to funding, awareness and technical assistance to MFIs... But knowing that, what can we actually do to overcome those barriers? Once this conversation is over, what ideas can we implement? Which steps can we take right now to sentitize a variety of actors as Marie-Ange just recommneded: "We found that this was a multifaceted challenge which required cooperation from governments in terms of trade/tariff policies, help from the private sector, NGOs and community leaders in terms of changing attitudes and practices and focusing communities on the benefits of the new technology and participation of MFI’s in financing producers and buyers" We would like to hear from you: what are your thoughts on what MFIs, donors, investors and energy companies can realistically do to change the actual situation and offer a new deal? Ellen and Beth recommended for example the development of an energy ecosystem with the help of intermediaries or facilitators which would both strengthen and smoothen the market.: "It is important to help MFIs find solid energy enterprises that give them what they need in terms of products and services. I agree that it is overwhelming and time consuming for MFIs to have to choose a energy supplier, a product, etc. because it is not in their core business to be able to know how to select or do the necessary due diligence on their energy partner. This problem highlights the needs for reputable and objective intermediaries, but it is difficult to find a way to pay for those services." If MFIs need to outsource energy support, can a business do that? Or should it be a donor funded multi-year initiative to build the sector? Let's be forward looking and prioritize actions that would rapidly allow growth in the micro-energy sector. Please share your ideas and opinions without fear, because with 2 billion people to serve competition is irrelevant. David
For 3rd day
MFIs
- Internalize energy loan product by
creating awareness among board and management
- Find ways of creating awareness among
clients to help assess demand for energy loans
- Be proactive in making use of their fund
and seek from market (local/international) wherever feasible
- To make it more result oriented, focus
more on those clients with enterprise but needing energy support to help boost
income from the enterprise in operation.
- If possible develop demonstration site
(group/village/area) for energy-enterprise loan to show others for easy
replication
- Though can start with one energy product
may be biogas or solar, but need to diversify gradually to meet needs of the clients
(as one product may not fit all)
- Develop attitude of having close
partnership with suppliers (not to see them as huge profit making entities and
expecting them to invest more)
- Develop separate monitoring mechanism for
energy loans to track failure cases (technical aspects mainly) for
rectification from supplier side
- Find possible ways of linking energy
product with some insurance mechanism, to the extent feasible
- Gauze impact of energy loans on periodic
basis
Donors
- Help create environment for ‘ownership
feeling’ among local partners for energy product so that it could roll
out easily
- Capacity building of both MFIs and
energy suppliers is a must
- Provide funding as per need (mainly technical
assistance + credit fund). Cost sharing approach may not work fully as neither
MFIs nor suppliers are financially in good shape to contribute. They can
provide their institutional and client base to work with to help reach more
number of people for scaling up.
- Result based funding mechanism, not
simply putting money works.
- Help develop linkage with credit funding
organization
- Pilot first before scaling up so that
end results are achievable in the long run
- Let MFIs select their clients and assess
repayment capacity as they know their clients better. NO doubt
training/educating MFI personnel will be needed as this is new product for them
- Support in linking energy project with
carbon trading to make the sector sustainable in the long run. Always need to ensure
that all three key parties – clients, MFIs and Companies are benefited from
the carbon revenue.
- Support in creating enabling environment
to make energy lending more friendly and sustainable.
- Donor funding should be multi-year
initiative with the objective of developing the sector to help reach more
number of poor people.
Investors
-
Should
not treat energy product as lucrative business, at least in the beginning, and
need to have soft corner in the beginning, particularly on interest rate issue.
Once it rolls out and MFIs and companies start operating as a viable business
then second thought can be given
-
Investors
should think of generating profit by linking with carbon financing than simply
on investment made to MFIs or companies
-
Emphasize
on more than one energy product
Energy
companies
-
Be more business
oriented than simply doing work for survival
-
Should
develop attitude of working in close partnership with MFIs, supporting in MFIs’
work to the extent feasible to help minimize additional burden to MFIs due to
energy product
-
Be
willing to bear risk associated with construction, after sales service and quality
work for energy product affecting loan collection performance of MFIs
-
Create
awareness on use of RETs among people and clients
-
Putting
client first! – maintaining honesty and transparency a must in supplying energy
product.
-
Do the business
with scaling up idea to reach more people
-
Develop company’s
capacity- manpower, equipment and other supporting activities to meet the
target
-
Seek
funding support (TA plus fund for workshop materials) from wherever possible
Ramesh
|
David,
There are no short cuts. From my experience, the only way out is when there is a concerted effort - donors, governments, private sector and civil society. We are trying to piece this together at the moment in Kenya but it is a slow process. The barriers are overwhelming. Every one works in tiny islands created of their own. The energy sectoral players need to sell their concepts to the financing sector and vice versa. Private sector needs to come together and work closely with others, especially civil society to gain that extra leverage of reaching the markets. More importantly, there has to be long term visions and plans. Success of energy interventions is not new and can be achieved.
Dear David,
Next week, at the Nairobi International Finance Corporation’s Lighting Africa meeting, there will be continuing discussions on a seal of approval for solar lighting products - like a UL label. There is a stunning amount of misinformation and hype in some products offered by manufacturers - LED run times of 100,000 or 40 hours of battery capacity on a day’s charge, etc. If producers decide to have their products tested and then get the seal, it will be a great step forward for NGOs and consumers.
Best - Mark
Mark,
Agree with you! Quality, quality and quality. 3 words to pitch to the financing world and consumers.
The quality of the components/technology is critical but equally important is
the installation quality. Millions of dollars of renewable energy equipment in
developing countries is inoperable as a result of poor installation. With
regards to the Nepal Biogas program - one of the incentives for keeping a
capital subsidy on the systems is that they can continue to set and monitor the
installation standards. Installation standards become much harder to set/enforce
for programs that don't have a similar centralized structure.
- jeff
Agreed that quality issues are a challenge. MFIs could use technical assistance in ensuring the quality of supplier products is sound, and also in providing technical training to its loan officers/ sales force to ensure they are configuring systems correctly for prospective clients. To Beth and Ellen’s point earlier, an important first step towards establishing an energy ecosystem would be to ensure there are clear and accurate quality standards in place that energy companies must follow.
Grant funding can play a key role in supporting energy lending for MFIs until they gain experience in the energy sector and their energy loan programs reach sustainability.
I agree with you and would top this statement adding
the quality of after-sales: Currently subsidies are often disbursed to the solar
companies after controlling the quality of the installation - This is definitly
not enough, as after sales are also crucial - I think a final subsidy
disbursment should be made at the end of the loan period: If the customer
approves that he got adequate service...
- Noara
Von: Speakers Corner 37: Microfinance and
Energy: Scaling Up Energy Access Through Enterprise-Based Approaches and
Innovative Financing [mailto:microfinanceandenergy@microlinks.kdid.org]
Gesendet: Mittwoch, 12. Mai 2010 23:00
Betreff: The quality
of the
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Posted by
jhaeni
See the original post here microlinks.kdid.org/speakers-corner-37-microfinance-and-energy-scaling-energy-access-through-enterprise-based-approach-12#comment-485
The quality of the components/technology is critical
but equally important is
the installation quality. Millions of dollars of
renewable energy equipment in
developing countries is inoperable as a result
of poor installation. With
regards to the Nepal Biogas program - one of the
incentives for keeping a
capital subsidy on the systems is that they can
continue to set and monitor the
installation standards. Installation
standards become much harder to set/enforce
for programs that don't have a
similar centralized structure.
-
jeff
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