Clean energy access is a major constraint for the world’s poor. Over a quarter of the world’s population lacks access to electricity, while some 2 billion people are forced to spend large amounts of time and resources on traditional biomass for cooking and heating.
Where modern energy services are unavailable, people resort to expensive and unsustainable systems, which can exacerbate energy insecurity and leave communities more vulnerable to the effects of climate change.
In many countries however, thanks to recent technological developments, efforts to widen access to clean energy now depend less on technology and more on financing arrangements, backed by a policy environment that is focused on serving the poor.
What Do We Do?
The UNCDF CleanStart programme supports low-income consumers to transition to cleaner and more efficient energy through microfinance. CleanStart is a global programme helping to lift at least 2.5 million people out of energy poverty by 2017.
The programme provides risk capital and technical assistance to competitively selected financial service providers and energy enterprises. The selected businesses then develop and refine scalable consumer financing models, addressing critical bottlenecks in the value chain that can affect scalability. They share the research and tools they generate throughout the industry, and advocate for industry-wide changes while brokering partnerships up the value chain, such as with investors and policymakers.
At the heart of the CleanStart approach is public-private partnership around a common vision of expanding energy access for the poor.
In Nepal, for example, CleanStart collaborates closely with the Central Renewable Energy Fund, a $120 million multi-donor wholesale fund dedicated to renewable energy, to build confidence among commercial banks in the prospects of financing the clean energy sector. In 2014, four financial institutions in Nepal extended loans for solar home systems, biogas and improved cook stoves to over 10,000 clients, testing innovations in consumer financing for clean energy.
Through CleanStart, UNCDF contributes to the global Sustainable Energy for All (SE4All) initiative.
Smoke-free and Solar-powered through CleanStart
Since April 2014, the CleanStart Programme has been working closely with financial service providers in Nepal to expand micro-loans for cleaner and more efficient energy such as solar lighting and improved cooking solutions.
The four partners – ACE Development Bank Ltd. (ACE); Jeevan Bikas Samaj (JBS); Sana Kisan Bikas Bank Ltd. (SKBBL); and Clean Energy Development Bank Ltd. (CEDBL) – have set out to reach together at least 102,000 households and micro-entrepreneurs throughout Nepal by 2017.
By January 2015, these partners collectively provided energy loans to over 10,000 clients, with the bulk of loans financing solar home systems of 20-watt peaks or higher which typically powers four lights. So how did they do it?
JBS has 60 branch offices in seven districts serving the poorest of the poor. SKBBL, meanwhile, partners with 384 small farmer cooperatives in more than 50 districts, many of them located in Nepal’s remotest regions. JBS has some experience with providing biogas loans, but for SKBBL energy lending is new territory. To date, JBS is offering energy loans in all seven of its operating districts and SKBBL in 38 districts.
SKBBL wants the home of every member farmer—totaling 384,000 households—to be smoke-free and lit with solar energy. JBS has set up a subsidiary called JBS Urja (‘energy’ in Nepali) as a one-stop shop that not only markets products but also provides installation and maintenance services. It has 29 technicians and provides after-sales service within 48 hours. Smaller financial intermediaries operating near JBS are keen to partner with JBS given their distribution and servicing capacity. At the moment, JBS Urja is providing technical assistance and trainings to microfinance institutions that have requested technological support.
The ability to deliver a captive market has placed SKBBL and JBS in good positions to negotiate prices for their clients. In fact, the solar home systems they offer are about 3,000 NPR (US$30) cheaper than market price. On top of this, SKBBL offers their energy lending at an interest rate one percent lower than that of their regular credit products. Every bit helps, given that many JBS and SKBBL clients live in grid-connected areas, and purchase solar home systems as a back-up source for an unstable electricity supply.