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| − | <div class="page" title="Page 35"><div class="layoutArea"><div class="column"> | + | <div title="Page 35 " class="page"><div class="layoutArea"><div class="column"><span style="background-color: rgb(255, 255, 255)"></span> [[Portal:Financing and Funding|► Back to Financing & Funding Portal]] |
| − | <span style="background-color: rgb(255, 255, 255);"></span> [[Portal:Financing and Funding|► Back to Financing & Funding Portal]] | + | |
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| − | = Overview =
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| | + | = Overview = |
| | One of the most common financing concepts for small‐scale decentralized/off-grid renewable energy projects has been different types of microfinance services, i.e. provision of debt to fund low‐cost, clean energy equipment<ref name="IEA, 2011. Renewable Energy - Policy Considerations for Deploying Renewables.">IEA, 2011. Renewable Energy - Policy Considerations for Deploying Renewables. </ref>. Many microfinance funds were initially specialized for one technology, such as solar home systems. They are increasingly expanding, however, to other renewable energy systems, so that a single financing agency may provide finance for a number of different renewable energy technologies, including renewable household systems, improved biomass cooking stoves as well as community small‐grid systems<ref name="IEA, 2011. Renewable Energy - Policy Considerations for Deploying Renewables.">IEA, 2011. Renewable Energy - Policy Considerations for Deploying Renewables. </ref>. | | One of the most common financing concepts for small‐scale decentralized/off-grid renewable energy projects has been different types of microfinance services, i.e. provision of debt to fund low‐cost, clean energy equipment<ref name="IEA, 2011. Renewable Energy - Policy Considerations for Deploying Renewables.">IEA, 2011. Renewable Energy - Policy Considerations for Deploying Renewables. </ref>. Many microfinance funds were initially specialized for one technology, such as solar home systems. They are increasingly expanding, however, to other renewable energy systems, so that a single financing agency may provide finance for a number of different renewable energy technologies, including renewable household systems, improved biomass cooking stoves as well as community small‐grid systems<ref name="IEA, 2011. Renewable Energy - Policy Considerations for Deploying Renewables.">IEA, 2011. Renewable Energy - Policy Considerations for Deploying Renewables. </ref>. |
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| | = Introduction to Microfinance = | | = Introduction to Microfinance = |
| − | | + | <span style="background-color: rgb(255, 255, 255)"></span>[[Financing Mechanisms for Cookstove Dissemination#Introduction to Microfinance|► Read more here]]<br/> |
| − | <span style="background-color: rgb(255, 255, 255);"></span>[[Financing_Mechanisms_for_Cookstove_Dissemination#Introduction_to_Microfinance|► Read more here]]<br/> | + | |
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| | </div></div></div> | | </div></div></div> |
| | = <span data-scaytid="108" data-scayt_word="Microfinance">Microfinance for RE Projects</span> = | | = <span data-scaytid="108" data-scayt_word="Microfinance">Microfinance for RE Projects</span> = |
| | + | <span data-scaytid="110" data-scayt_word="Microfinance">Microfinance</span> Institutions (<span data-scaytid="117" data-scayt_word="MFIs">MFIs</span>) are being used to channel funds for small-scale renewable energy technology (RET) projects, particularly at a household and community-level for off-grid electrification. Such projects are generally developed by small suppliers and serve low-income communities with limited ability to pay up front. Thus small-scale projects can face even greater problems that other RET projects in raising capital for initial investments<ref name="The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds."> The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds.</ref><span style="line-height: 1.5em; font-size: 0.85em">.</span> |
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| | + | <div class="page" title="Page 35"><div class="layoutArea"><div class="column"><span data-scaytid="455" data-scayt_word="MFIs">MFIs</span> provide loans to house- holds, either directly or via the equipment supplier, who can then use this to pay for at least part of the capital costs of RET systems. The need to collect repayments also provides an incentive for the supplier to maintain and ensure the continuing operation of the systems post installation<ref name="The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds."> The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds.</ref><span style="line-height: 1.5em; font-size: 0.85em">.</span> |
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| − | <span data-scaytid="110" data-scayt_word="Microfinance">Microfinance</span> Institutions (<span data-scaytid="117" data-scayt_word="MFIs">MFIs</span>) are being used to channel funds for small-scale renewable energy technology (RET) projects, particularly at a household and community-level for off-grid electrification. Such projects are generally developed by small suppliers and serve low-income communities with limited ability to pay up front. Thus small-scale projects can face even greater problems that other RET projects in raising capital for initial investments<ref name="The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds."> The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds.</ref><span style="line-height: 1.5em; font-size: 0.85em;">.</span>
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| − | <span data-scaytid="455" data-scayt_word="MFIs">MFIs</span> provide loans to house- holds, either directly or via the equipment supplier, who can then use this to pay for at least part of the capital costs of RET systems. The need to collect repayments also provides an incentive for the supplier to maintain and ensure the continuing operation of the systems post installation<ref name="The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds."> The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds.</ref><span style="line-height: 1.5em; font-size: 0.85em;">.</span>
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| − | | colspan="3" style="text-align: center; background-color: rgb(79, 129, 189);" | <font color="#ffffff"><span style="line-height: 20.39583396911621px;">'''<span data-scaytid="356" data-scayt_word="MICROFINANCE">MICROFINANCE</span>'''</span></font> | + | | colspan="3" style="text-align: center; background-color: rgb(79, 129, 189)" | <font color="#ffffff"><span style="line-height: 20.39583396911621px">'''<span data-scaytid="356" data-scayt_word="MICROFINANCE">MICROFINANCE</span>'''</span></font> |
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| − | | style="background-color: rgb(219, 229, 241); text-align: center;" | '''Uses''' | + | | style="background-color: rgb(219, 229, 241); text-align: center" | '''Uses''' |
| − | | style="background-color: rgb(219, 229, 241); text-align: center;" | '''Pros''' | + | | style="background-color: rgb(219, 229, 241); text-align: center" | '''Pros''' |
| − | | style="background-color: rgb(219, 229, 241); text-align: center;" | '''Cons''' | + | | style="background-color: rgb(219, 229, 241); text-align: center" | '''Cons''' |
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| − | | colspan="3" | ''<span style="font-size: 80%; line-height: 20.39583396911621px;">Source: </span><span style="font-size: 80%; line-height: 18px;">Adapted from The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds</span>''<ref name="The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds.">The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds.</ref> | + | | colspan="3" | ''<span style="font-size: 80%; line-height: 20.39583396911621px">Source: </span><span style="font-size: 80%; line-height: 18px">Adapted from The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds</span>''<ref name="The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds.">The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds.</ref> |
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| − | <span data-scaytid="23" data-scayt_word="MFIs">MFIs</span> are characterized by their focus on lending to households and small businesses—generally for productive invest<span data-scaytid="27" data-scayt_word="ments">ments</span> or to support agricultural activities. Most <span data-scaytid="24" data-scayt_word="MFIs">MFIs</span> have a relatively narrow focus in <span data-scaytid="35" data-scayt_word="geographi">geographi</span><span data-scaytid="36" data-scayt_word="cal">cal</span>, product, and sector terms. Loans are typically made at relatively high interest rates and for short <span data-scaytid="38" data-scayt_word="peri">peri</span><span data-scaytid="39" data-scayt_word="ods">ods</span>, to be repaid from the additional revenues generated by the investment or from the future sale of crops. Longer-term lending for <span data-scaytid="40" data-scayt_word="appli">appli</span><span data-scaytid="41" data-scayt_word="ances">ances</span> where repayment depends on household incomes, as is the case for the purchase of [[Solar Home Systems|Solar Home Systems]], is therefore a change in business model for many <span data-scaytid="25" data-scayt_word="MFIs">MFIs</span>. In Bangladesh [[Results-based Financing|Results Based Financing]] (<span data-scaytid="822" data-scayt_word="RBF">RBF</span>) has been used in combination with <span data-scaytid="44" data-scayt_word="microfinance">microfinance</span> to refinance <span data-scaytid="26" data-scayt_word="MFIs">MFIs</span> after they have been verified to have carried out appropriate installations, thus freeing <span data-scaytid="29" data-scayt_word="MFI">MFI</span> funds for further lending. | + | <span data-scaytid="23" data-scayt_word="MFIs">MFIs</span> are characterized by their focus on lending to households and small businesses—generally for productive invest<span data-scaytid="27" data-scayt_word="ments">ments</span> or to support agricultural activities. Most <span data-scaytid="24" data-scayt_word="MFIs">MFIs</span> have a relatively narrow focus in <span data-scaytid="35" data-scayt_word="geographi">geographi</span><span data-scaytid="36" data-scayt_word="cal">cal</span>, product, and sector terms. Loans are typically made at relatively high interest rates and for short <span data-scaytid="38" data-scayt_word="peri">peri</span><span data-scaytid="39" data-scayt_word="ods">ods</span>, to be repaid from the additional revenues generated by the investment or from the future sale of crops. Longer-term lending for <span data-scaytid="40" data-scayt_word="appli">appli</span><span data-scaytid="41" data-scayt_word="ances">ances</span> where repayment depends on household incomes, as is the case for the purchase of [[Solar Home Systems (SHS)|Solar Home Systems]], is therefore a change in business model for many <span data-scaytid="25" data-scayt_word="MFIs">MFIs</span>. In Bangladesh [[Results-Based Financing|Results Based Financing]] (<span data-scaytid="822" data-scayt_word="RBF">RBF</span>) has been used in combination with <span data-scaytid="44" data-scayt_word="microfinance">microfinance</span> to refinance <span data-scaytid="26" data-scayt_word="MFIs">MFIs</span> after they have been verified to have carried out appropriate installations, thus freeing <span data-scaytid="29" data-scayt_word="MFI">MFI</span> funds for further lending. |
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| | Public financing of such <span data-scaytid="46" data-scayt_word="MFI">MFI</span> initiatives can be provided through a variety of instruments. These can include the provision of credit lines to increase available funding and lower the costs of customer loans, the provision of grants or subsidies for a similar purpose (often on a <span data-scaytid="47" data-scayt_word="RBF">RBF</span> approach), or the provision of <span data-scaytid="51" data-scayt_word="guaran">guaran</span>tees to cover <span data-scaytid="48" data-scayt_word="MFIs">MFIs</span> against part of the losses they might sustain from loan defaults—either directly or through the failure of<br/>supplied equipment<ref name="The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds."> The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds.</ref>. | | Public financing of such <span data-scaytid="46" data-scayt_word="MFI">MFI</span> initiatives can be provided through a variety of instruments. These can include the provision of credit lines to increase available funding and lower the costs of customer loans, the provision of grants or subsidies for a similar purpose (often on a <span data-scaytid="47" data-scayt_word="RBF">RBF</span> approach), or the provision of <span data-scaytid="51" data-scayt_word="guaran">guaran</span>tees to cover <span data-scaytid="48" data-scayt_word="MFIs">MFIs</span> against part of the losses they might sustain from loan defaults—either directly or through the failure of<br/>supplied equipment<ref name="The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds."> The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds.</ref>. |
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| − | | colspan="3" style="text-align: center; background-color: rgb(79, 129, 189);" | <font color="#ffffff"><span style="line-height: 20.383522033691406px;">'''Consumer Loans through Rural Microfinance'''</span></font> | + | | colspan="3" style="text-align: center; background-color: rgb(79, 129, 189)" | <font color="#ffffff"><span style="line-height: 20.383522033691406px">'''Consumer Loans through Rural Microfinance'''</span></font> |
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| − | | style="background-color: rgb(219, 229, 241); text-align: center;" rowspan="1" colspan="2" | '''Advantages''' | + | | style="background-color: rgb(219, 229, 241); text-align: center" rowspan="1" colspan="2" | '''Advantages''' |
| − | | style="background-color: rgb(219, 229, 241); text-align: center;" | '''Disadvantages''' | + | | style="background-color: rgb(219, 229, 241); text-align: center" | '''Disadvantages''' |
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| | *The loans are designed specifically with rural financial requirements in mind so that repayment terms are acceptable to rural households.<br/> | | *The loans are designed specifically with rural financial requirements in mind so that repayment terms are acceptable to rural households.<br/> |
| | *Little or no collateral is typically required. | | *Little or no collateral is typically required. |
| − | </div></div></div><br/> | + | </div></div></div> |
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| | *Loans are not generally for long periods and payments for the purchase of renewable energy equipment remain too high for the majority of rural households in the region. | | *Loans are not generally for long periods and payments for the purchase of renewable energy equipment remain too high for the majority of rural households in the region. |
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| − | | colspan="3" | | + | | colspan="3" | ''<span style="font-size: 10.909090995788574px; line-height: 20.39583396911621px">Source: Adapted from </span><span style="font-size: 10.909090995788574px; line-height: 20.39583396911621px">Wade, H. (2005). Financing Mechanisms for Renewable Energy Development in the Pacific Islands. </span><span style="font-size: 10.909090995788574px; line-height: 20.39583396911621px">Available at:[http://www.sprep.org/attachments/climate_change/FinancingMechanismsforREDevelopment_000.pdf http://www.sprep.org/attachments/climate_change/FinancingMechanismsforREDevelopment_000.pdf] </span> <ref name="Wade, H. (2005). Financing Mechanisms for Renewable Energy Development in the Pacific Islands.">Wade, H. (2005). Financing Mechanisms for Renewable Energy Development in the Pacific Islands.</ref>'' |
| − | ''<span style="font-size: 10.909090995788574px; line-height: 20.39583396911621px;">Source: Adapted from </span><span style="font-size: 10.909090995788574px; line-height: 20.39583396911621px;">Wade, H. (2005). Financing Mechanisms for Renewable Energy Development in the Pacific Islands. </span><span style="font-size: 10.909090995788574px; line-height: 20.39583396911621px;">Available at:[http://www.sprep.org/attachments/climate_change/FinancingMechanismsforREDevelopment_000.pdf http://www.sprep.org/attachments/climate_change/FinancingMechanismsforREDevelopment_000.pdf] </span> <ref name="Wade, H. (2005). Financing Mechanisms for Renewable Energy Development in the Pacific Islands.">Wade, H. (2005). Financing Mechanisms for Renewable Energy Development in the Pacific Islands.</ref>'' | + | |
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| − | </div></div></div>
| + | == Challenges == |
| − | <span style="line-height: 1.5em; font-size: 0.85em;"></span>
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| − | </div></div></div></div></div></div>
| + | *experiences to date with loans for energy services and technologies are limited |
| | + | *lack of documented successes |
| | + | *lack of experience by both the energy and microfinance fields |
| | + | *entry barriers: loan takers have never taken up a loan before |
| | + | *risk of worsening credit taker's financial situation in case of default |
| | + | *finding credit products suited for funding of modern energy technologies |
| | + | *limited knowledge of modern energy technologies among MFI personnel |
| | + | *technical / management risks: low quality products and weak energy providers may not be able to ensure appropriate maintenance |
| | + | *pay back capacity and pay back rates among loan takers may be (perceived to be) poor |
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| − | = Integrating a Microfinance Specialist into an Energy Project =
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| − | <span style="background-color: rgb(255, 255, 255);"></span>[[Financing_Mechanisms_for_Cookstove_Dissemination#Integrating_a_Microfinance_Specialist_into_an_Energy_Project|► Read more here]]<br/> | + | = Integrating a Microfinance Specialist into an Energy Project = |
| | + | <span style="background-color: rgb(255, 255, 255)"></span>[[Financing Mechanisms for Cookstove Dissemination#Integrating a Microfinance Specialist into an Energy Project|► Read more here]]<br/> |
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| | = High Value Turnover versus Business Costs for Profitable Microfinance Systems = | | = High Value Turnover versus Business Costs for Profitable Microfinance Systems = |
| | + | <span style="background-color: rgb(255, 255, 255)"></span>[[Financing Mechanisms for Cookstove Dissemination#High Value Turnover versus Business Costs for Profitable Microfinance Systems|► Read more here]]<br/> |
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| − | <span style="background-color: rgb(255, 255, 255);"></span>[[Financing_Mechanisms_for_Cookstove_Dissemination#High_Value_Turnover_versus_Business_Costs_for_Profitable_Microfinance_Systems|► Read more here]]<br/>
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| | = Further Information = | | = Further Information = |
| | | | |
| | *[[Microfinance Institutions - Financing Renewable Energy|Microfinance Institutions - Financing Renewable Energy]]<br/> | | *[[Microfinance Institutions - Financing Renewable Energy|Microfinance Institutions - Financing Renewable Energy]]<br/> |
| − | *[[Use of Microfinance Institutions (MFI) for Renewable Energy Technolgies|Use of Microfinance Institutions (MFI) for Renewable Energy Technologies]]<br/> | + | *[[Use of Microfinance Institutions (MFI) for Renewable Energy Technologies|Use of Microfinance Institutions (MFI) for Renewable Energy Technologies]]<br/> |
| | *[[Energizing Microfinance Workshop Documentation|Energizing Microfinance Workshop Documentation]]<br/> | | *[[Energizing Microfinance Workshop Documentation|Energizing Microfinance Workshop Documentation]]<br/> |
| | *[[Financing Models for Solar Home Systems|Financing Models for Solar Home Systems]]<br/> | | *[[Financing Models for Solar Home Systems|Financing Models for Solar Home Systems]]<br/> |
| − | *[[Financing_Mechanisms_for_Cookstove_Dissemination|Microfinance for Improved Cookstoves]] | + | *[[Financing Mechanisms for Cookstove Dissemination|Microfinance for Improved Cookstoves]] |
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| − | = References =
| |
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| | + | = References = |
| | <references /><br/><br/> | | <references /><br/><br/> |
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| − | [[Category:Financing_and_Funding]]
| + | </div></div></div></div></div></div></div></div></div><br/> |
| − | [[Category:Solar]]
| + | |
| − | [[Category:Solar_Home_Systems_(SHS)]]
| + | |
| | [[Category:Financing_Solar]] | | [[Category:Financing_Solar]] |
| | + | [[Category:Solar_Home_Systems_(SHS)]] |
| | + | [[Category:Solar]] |
| | + | [[Category:Financing_and_Funding]] |
