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Microfinancing Renewable Energy Technologies
“Exploring the Niche” in Kenya[1]
Background
Access to modern energy services is key to reduce negative impacts on health and the environment as well as to boost socio-economic development. In Kenya, 16% of the total population has access to electricity and only 7.16% have access to financial services[2]. Moreover, 83% of households rely on traditional biomass resources and fossil fuels[3].
Objective
The research aims at identifying the potential for microfinancing Renewable Energy Technologies (RETs) in Kenya. It is assumed that microfinancing RETs can essentially contribute to poverty reduction in the country [1].
Methodology
The researchers applied a qualitative analysis including 16 interviews with experts of Microfinance Institutions (MFIs), Savings and Credit Cooperatives (SACCOs), Providers of Renewable Energy Technologies (RETs), NGOs and the Government (Ministry of Energy)[1]. In addition, the analysis involved focus group discussions.
Results
MFIs are not only valuable to clients who lack financial means to use RETs. MFIs are moreover important for RET providers, as they can offer access to new potential clients. However, credits for RETs have so far rarely been integrated into the portfolio of MFIs, as they are for example not willing to take the risk of clients not paying back their loan. Moreover, insufficient technological know-how, high administrative costs and interest rates for loans between 22-42% pose challenges for microfinancing in this sector.
In addition, providers of RETs who provide the technological know-how can offer after-sales services, assistance and training as well as raise awareness and advertise their technology. It is assumed to be necessary that providers integrate the rural population and adapt their products to local conditions such as climate and cultural impacts.
The researchers argue that a cooperation structure is needed that increasingly links MFIs, providers of RETs and potential clients. NGOs which consider the access to modern energy sources as an essential tool for poverty reduction are seen to be in the right position to link these actors. As NGOs are usually trusted and have good access to the local population, they can provide information and raise awareness among people. Moreover, NGOs can reduce the potential risks for MFIs, as they could step in, if clients were not able to pay back their loan. Thus, supporting NGOs could improve the cooperation between MIFs and providers of RETs as well as increase the potential of using RETs among clients who often need financial assistance to obtain RETs.
Conclusion
There is a huge potential for microfinancing RETs in Kenya. RETs such as improved cooking stoves, biogas plants and particularly solar lanterns could be provided more easily to the clients with the proposed cooperation structure. However, various challenges need to be faced.
