Welcome: Getting ready for the online discussion on Tuesday on Energy and Microfinance
Welcome everyone who has already signed up for next week's discussion on microfinance and energy. The forum will begin on Tuesday May 11. Some of you may be receiving this message in your spamfilter or quarantine area. If so, please add this e-mail address to your safe sender list.
If you want to invite colleagues and contacts to this discussion, please forward the announcement below or send them directly to http://www.microlinks.org/energydiscussion for more information and to register.
We look forward to your participation next week!
Regards,
Anna van der Heijden
microLINKS team
speakerscorner@microlinks.org.
May 11-13 USAID Speakers Corner: Microfinance and Energy: Scaling Up Energy Access through Enterprise-Based Approaches and Innovative Financing.
http://www.microlinks.org/energydiscussion
Access to modern energy services is a catalyst for progress across the spectrum of development priorities, including economic growth and improved education and health. Currently, over 2.4 billion people worldwide have no access to safe, clean, and reliable sources of energy. Enterprise-based delivery models hold great promise to meet the needs of these underserved populations in a sustainable, scalable and commercially viable manner. One key component to such approaches is access to appropriate forms of enterprise and consumer financing.
Please join us on May 11-13, 2010 for a Speakers Corner online forum to discuss energy and microfinance and explore how microfinance may help increase access to modern energy services. Hosted by Jeffrey Haeni (USAID/Energy) and Carissa Page (USAID/Microenterprise) and facilitated by an expert panel, the discussion invites participants to share their own experiences, questions and comments in the online discussion forum:
- Day 1 Tuesday May 11: Current Status and Successful Models
Facilitators: Ellen Morris (Arc Finance), David Levai (Center for Financial Inclusion). - Day 2 Wednesday May 12: Opportunities and Challenges
Facilitators: Phyllis Kariuki (GVEP International), Kavita Rai (GVEP International). - Day 3 Thursday May 13: The Path Forward: Scaling Up
Facilitators: Jennye Greene (E+Co), Jacob Winiecki (Simpa Networks).
Sign up today: For more information and free registration, visit the Microfinance and Energy Speakers Corner Event page on http://www.microlinks.org/energydiscussion . Note: If you are new to the site, please be sure to activate your account after you create it, and then visit the Speakers Corner event page again to join the group. Please send questions to speakerscorner@microlinks.org.
According to CGAP, 381 microfinance institutions (MFI) operate in Africa offering end-user finance to more than 6 million clients. After having gained experiences in financing micro enterprises, a step to advance diversification may be realized through energy programs.
Comparing to Asia, the African MFI sector is pre-dominant in urban and peri-urban areas. Low population density and weak infrastructure are making rural outreach very expensive. For this reason, an important part of the African microfinance clients have their household and/or their business within electrified areas and thus need support to get access and finance for grid connection. In case they are already grid-connected, financing for energy efficient appliances or adapted back up systems to overcome regular power outage is required.
It seams that in Africa, the Equity Bank has been a pioneer in offering grid-connection loans. In close cooperation with the Kenyan Utilities, the STIMA is a group-loan (approx. US$ 1000) designed in a way, that the customer has to pay 20% up-front and balance after 12, 24 or 36 months. A specific challenge of this business model is to adjust the timing between the loan processing and the physical grid-connection to the household or business. This and the fact that bribes play a non-negligible role in the grid-connection process make many African MFIs hesitant regarding this offer, although it might be very attractive for their clients.
For this reason, MFIs in Africa who have a certain outreach to rural areas (they are not many ot them) prefer to offer loans for small scale off-grid electrification appliances as e.g. solar lamps or solar home systems. The required partnerships in this cases are easier to handle. Still, the policy framework, subsidies and available credit lines need adjustment. Under actual conditions, systems are financed through business loans who have to be repayed in 3 to 12 months: This is quiet short, specially in comparison with the above described STIMA loans that can be repayed in 36 months. Experience has shown that this loan period is often too short because the return on investment that is based only on the substitution of kerosene, dry cells, batteries and mobile phone charging costs require terms of 2 to 5 years minimum. Re-financing funds that support these conditions and carry the according risks would be very helpful. Currently, most MFI clients in Africa have to use other income sources to repay the installments for their energy loans if they are not able to integrate their energy system in to their business in a way that it increases the productivity substantially so that they can serve business loans with the respective returns.
This fact makes it challenging to reach out to poorer families and households: They might not be able to improve their productivity with energy so fast due to the nature of their businesses or to the size of energy systems they can afford as, despite very few exceptions, productivity and power grow in a close correlation.
A look to successfull linkages of microfinance and electrification in Asia shows, that the institutions have access to credit lines that allow the extantion of loan periodes to 2 or more years.
Would you share this view?
Did you experience other business models in Africa?
What is the longest repayment period for energy loans you have heard about?
I am quite interested to know if there are companies, ngo's, organizations or institutions who are thinking of introducing concentrated photovoltaic technology at small and medium scale.
There is a vast potential both for CPV system designers and manufacturers as well as financing organizations. We have underlined more than 1,000MW shortage only in one country that is potentially open for renewable energy technology.
A well planned model for financial transaction between system designers, financing institution, importers and end-user can open up an entirely new market for development.
Your thoughts and input are welcomed.
