Microfinancing Decentralized Solar Energy Systems in India: Innovative Products through Group Approach

Microfinancing Decentralized Solar Energy Systems in India: Innovative Products through Group Approach

Presenter: Satish Pillarisetti, (National Bank for Agriculture and Rural Development, India)

Rapporteur: Austin Cappon

Overview

The apex development bank in India-NABARD (National Bank for Agriculture and Rural Development) first facilitated the microfinancing scheme for solar home lighting system by rural banks. This turned out to be a success and the government introduced a subsidy linked bank credit programme to upscale and mainstream the programme. Initially the programme met with only a limited success as it had too many loose ends. Later, with a number of modifications, the programme gradually took off and is now making steady progress. However, NABARD realized that there are many areas and communities which may not be able to benefit by this scheme and may need a different financial product. NABARD developed group based products for such communities. These products are based on a partnership with NGOs, and at times involving retail banks. The successful take off of two such products is discussed here.

250px

Main Issues Discussed

· Financing rural home lighting

o This has been facilitated by a change in the govt approach to finacning,

· Case Study: Girls Hostels

o Many islands lack grid connectivity

§ Rather rely on gas lamps

o Solar Led was the propoesd solution

o Needed financing 30% as loan and 50% grant.

§ Remaing balance was split (see slide 5)

o RIF = Rural Innovation Fund

· Case study: Charging stations

o 40 charging stations wuld be set up and 2000 families covered in total

o Only 250 families came to be covered in total

§ They didn’t like LEDs but rather CFLs

§ So the govt came to contact Nabard (Satish’s Group) and they had to change their approach

§ 93% of stations are functional

§ Loans serviced regularlly, no issues with repayment

· Effective Community Participation Needed

· “People are ready for group financinal projects, but not physical projects”

· Loan Portion of all cases is at market values (15%) which is not subsidized

· More Field evaluation is needed,

o Project reports

o Field evidences

o Need for more evaluation with all three cases

In some cases in rural India, “People are ready for group financinal projects, but not physical projects”

Questions Posed

u Big and small micro finance: How to motivate each:

Natalia:

o Fondeserco: For Negotiating with funders for favorable conditions of loans, particularly if able to convince with enviro concerns.

§ Want to be leaders; marketing comes into play

o Caja (larger): More difficult as they received money from govt.

§ In the case it was a “champion” who was willing to come forward and assume the role as the player who was willing to connect players

Satish:

o Local field level organizations are the “superman” or group that was capable of motivating

Silva

Silva:

o Risk mitigation to drive down interests rates; many of the micro finance groups are charging 30% interests rates.

o His university is receiving a large PV installation with good interest rate

u How far can you get to that 1.3 Billion number with subsidized funding offers

o Natalia:

§ How can suppliers are financial institutions partner in a preferable way?

§ It’s a process… organizations have to demonstrate the viability of the model to one another

o Satish

§ In the case with 10% grants, the govt. seems to be willing to pay if it provides ample utility to the poorest of the poor. Interested in the social building.

o Audience Member (Hasna Khan)

§ The subsidies are vital in the early stages, but eventually there have to be profits realized by all groups, takes time

u Bundling of users seems to be a strategy to reduce risk

o Natalia

§ People are not interested in having to wait for other people to have to come on board to get something (like a solar heater)

§ Consequently they end up paying high interest rates (3% monthly!)