CleanStart Connections

Transcription

issue 2 MAy 2015
Customers
First! Finding
Breakthroughs
in Energy
Access Finance
country profile
A closer look at Ethiopia
Nepal
One year down the road
partnership
The innovative partnership between
Schneider Electric and PAMIGA
cleanstart connections
contents
2 Contributors
14
14
17
18
22
28
30
4 CleanStart: Microfinance opportunities for a clean energy future
7 main feature Story
Putting the Customer first: good for business
and good for innovation
Microfinance institutions
CleanStart’s two financial institution partners in
Nepal have big ambitions in expanding access to
clean energy for their clients.
i nvesting in cambodia’s energy future
Sun-eee seeks to bring electricity to thousands of
people in underdeveloped areas of Cambodia.
c ountry profile: ethiopia
Decentralized clean energy becomes an obvious
choice with the Government of Ethiopia aiming
to achieve middle-income status by 2025 through
carbon neutral economic growth.
oromia credit and saving share company
Alternative Energy Financing: Both a social
obligation and a sound investment.
Leading Light: abraha misghina
© UN Capital Development Fund 2015
localizing finance outside the capital cities can accelerate growth
in local economies, promote sustainable and climate resilient
infrastructure development, and empower local communities.
Using capital grants, loans, and credit enhancements, UNCDF
tests financial models in inclusive finance and local development
finance; ‘de-risks’ the local investment space; and proves
concept, paving the way for larger and more risk-averse investors
to come in and scale up.
c ementing a cleaner baking future in ethiopia
A group of stove producers in Ethiopia dream of
building a Mirt stove industry one stove at a time.
Social good investing
How and why clean energy enterprises are topping
the list. An interview with Robert Kraybill, Managing
Director of Impact Investment Exchange Asia (IIX).
CleanStart Connections spoke with Abraha
Misghina, the head of Ethiopia’s National Improved
Cookstoves Programme within the Ministry of Water,
Irrigation and Energy, to learn what makes the
country’s household energy challenge so unique.
The United Nations Capital Development Fund (UNCDF) is
the UN’s capital investment agency for the world’s 48 Least
Developed Countries (LDCs). UNCDF uses its capital mandate
to help LDCs pursue inclusive growth. UNCDF uses ‘smart’
Official Development Assistance (ODA) to unlock and leverage
public and private domestic resources; it promotes financial
inclusion, including through digital finance, as a key enabler of
poverty reduction and inclusive growth; and it demonstrates how
33
Financing for Energy
Country Profiles
First Person
20
Julie Marks / UNCDF
Francesca Cioni / UNCDF
3 Editorial: Customers First! Finding Breakthroughs in Energy Access Finance
36
pay-as-you-go Financing
Digital pay-as-you-go financing is transforming the
way people pay for energy.
40
partnership
CleanStart examines the innovative partnership
between Schneider Electric and PAMIGA.
44 CleanStart’s approach to country-level engagement
contributors
editorial
CleanStart Connections wishes to acknowledge the time and contributions of:
CleanStart Connections
Issue 2
DAMODAR REGMI
MAY 2015
Publisher
UNCDF CleanStart
Senior Manager Department Chief on
Institutional and Social Development
Department, Jeevan Bikas Samaj (JBS),
Nepal
Copy Editor
Megan Cossey
surya prakash hada
Printer
Advanced Printing Service Co.,
Ltd.
CleanStart Project Coordinator at Sana Kisan
Bikas Bank Ltd. (SKBBL), Nepal
ABRAHA MISGHINA
National Improved Cookstoves Program
Coordinator, Ethiopia
SOV LEang
Founder and CEO of Sun-eee Pte, Ltd.,
Cambodia
Abonesh Tesema
Mirt stoves producer, Ethiopia
Robert Kraybill
Managing Director of Impact Investment
Exchange Asia, Singapore
Tefera Tesfaye
District Director of Oromia Credit and
Saving Share Company (OCSSCo), Ethiopia
Designer
Pamela Geismar
front Cover photograph
Abonesh Tesema at her home
in Repi, Ethiopia, mixing
cement to build stoves.
(Yohannes Zirotti Oriste/
UNCDF)
back Cover photograph
Farmers in the Kavre district
of Nepal grind corn using an
improved watermill. (Narendra
Shrestha/UNCDF)
Special thanks to the the
Austrian Development
Cooperation (ADC),
Government of Liechtenstein,
Norwegian Agency for
Development Cooperation
(Norad), and Swedish
International Development
Agency (Sida) whose generous
financial contributions made
this publication possible.
The views expressed in
this publication are those
of the author(s) and do not
necessarily represent those of
the United Nations, including
UNCDF, or their Member
States.
Download a copy of CleanStart
Connections or read online at:
www.uncdf.org/en/cleanstart
Follow us on Twitter
@UNCDFcleanstart
Customers First! Finding Breakthroughs in Energy Access Finance
W
elcome to the second edition of CleanStart
Connections.
products to choices in how they finance the purchase of those
products. It is about putting customers first.
We are excited to finally get this second issue
out. Thanks for waiting.
Partnerships are key if we want to succeed and accelerate
energy access for the poor. With this goal in mind, more
than a 1,000 representatives from government, international
organizations, business and civil society, hailing from all over
the world, will gather in May 2015 for the second annual
Sustainable Energy for All (SE4All) Forum in New York.
Since the last issue, the team has been out and about
exploring new countries and talking to people who get
energized just talking about energy, including both
entrepreneurs and customers. That energized us too.
What did we learn as we went along?
We learned that microfinance institutions can be innovative.
When it comes to energy, microfinance institutions sometimes
have a reputation for being too rigid, unwilling to stray too
much from the way they already operate. Yet what did we see
in Nepal with our star partner, microfinance institution Jeevan
Bikas Samaj (JBS)? A different story. No barrier is too high for
JBS because they know their clients need better energy and
they are committed to delivering it, even if it takes setting up
their own energy company, which they did.
At the same time, the market is changing very fast and
we need to keep up to stay relevant. Even in 2012, when
CleanStart launched, we were not hearing much about the
pay-as-you-go model being applied to energy access. Then
… boom! More than US$40 million worth of investment went
into this business in 2014 alone. Pay-as-you-go financing is
definitely transforming the market, with estimates that more
than three million pay-as-you-go solar systems will be sold by
2019. Could it be that the full potential of mass-market clean
energy for the poor is about to become realized?
At the end of the day, we all want the same thing: the ability to
offer people a range of choices, from choices in clean energy
2 cleanstart connections
MAY 2015
It is a timely gathering as we enter a post-2015 era, which is
ushering in the Sustainable Development Goals. A prominent
part of Goal Seven is “ensuring access to affordable, reliable,
sustainable and modern energy for all.”
The Forum’s theme this year is “Financing Sustainable
Energy for All,” a recognition of the integral role financing
plays in making energy for all a reality. Research shows that
aggregating small-scale energy projects into large enough
pools to reduce transaction costs for investors and attract
additional finance could result in up to US$25 billion in
investments.
Unleashing capital at the right time and place can make
or break these businesses. But we have every reason to
be optimistic. There is a relentless drive in the market
to understand what customers want and we are seeing
opportunities transform into breakthroughs. CleanStart aims to
support more of these.
The stories in this issue of CleanStart Connections will speak
for themselves. You will be impressed at how resourceful
people from different corners of the globe can be when it
comes to energy.
– The CleanStart Team
MAY 2015
cleanstart connections 3
CleanStart microfinance opportunities for a clean energy future
CleanStart supports low-income households and micro-entrepreneurs to jump start their access to clean energy through
microfinance. It encourages greater financing choices for poor people, supported by high-quality technologies and
services, and enabling ecosystems for energy and financial service providers to achieve scale and impact.
Finance for Clean Energy to develop scalable consumer
and enterprise financing models.
Technical Assistance for Clean Energy to increase
the scale potential of financing models by creating a
supportive business ecosystem.
Knowledge and Learning to promote awareness and
customer-centric growth.
Advocacy and Partnerships to co-create a policy and
business environment that supports energy microfinance
to reach scale.
OUR LONG-TERM VISION
CleanStart aims to dramatically scale up energy financing
for the poor through a market-based approach in a large
number of developing countries with high levels of energy
poverty. This would build on:
• validated financing business models;
• commercialization of technologies and services that
offer value to low-income customers;
Yohannes Zirotti Oriste / UNCDF
CLEANSTART’S FOUR COMPONENTS
• critical mass of technical and managerial capabilities;
• expanding knowledge base from research and network
of partners; and
Charcoal for sale on
the road from Addis
Ababa to Arsi Negele
in Ethiopia.
• evidence-based advocacy in energy microfinance.
original CleanStart Business Model for financing clean energy
CleanStart
Preinvestment
assistance
Risk capital
grants
Concessional
loans
Product
design &
testing
Financing
for clean
energy
loan/lease
= CleanStart support
=F
inancial service
providers
$
>
>
$
repayments
>
= Energy suppliers
= End users
payments
>
Brokering
partnerships
$
tech/service
CleanStart’s partner
ACE Development Bank
in Nepal explains the
bank’s loan tracking
process.
MAY 2015
WHAT DOES UNCDF MEAN BY CLEAN ENERGY?
Clean energy includes renewable energy (e.g. solar), low
greenhouse gas-emitting fossil fuels (e.g. liquified petroleum
gas) and traditional fossil fuels that, through the use of
improved technologies and practices, produce less harmful
emissions (e.g. improved cookstoves).
snapshot
By 2017, close to 600,000 clean energy
technologies will be installed, which translates into
300,000 tonnes reduced CO2 emissions.
Launched in 2012, CleanStart was developed in collaboration with the United Nations Development Programme, United
Nations Environment Programme, Frankfurt School of Finance and Management, MicroEnergy Credits, MicroEnergy
International, Arc Finance and Columbia University.
MAY 2015
main feature story
Putting the Customer first:
good for business and good
for innovation
Energy enterprises and microfinance
institutions have much to gain by
joining forces in order to offer a range
of financing options that customers are
increasingly demanding. Participants
at a global forum jointly organized by
the Participatory Microfinance Group
for Africa (PAMIGA) and UNCDF
offered their perspectives on the real
innovation that can occur in the world
of energy access financing through
such collaborations.
Zeleman / UNCDF
Victoria Arch, cofounder and Director
of Strategy at Angaza
Design holds up a
solar lantern that has
a pay-as-you-go chip
embedded inside.
I
n recent years there has been a surge in new partnerships
between energy companies, product distributors, microfinance institutions and even mobile phone operators to
deliver cleaner and more efficient energy solutions to the
poor. These partnerships aim to tap into the mass market
demand for cheap and sustainable energy access. Currently,
1.2 billion people worldwide lack access to electricity, and
2.8 billion people do not have clean and safe cooking facilities. According to the Sierra Club’s 2014 report Clean Energy
Services for All, the energy access industry, excluding grid
extension, is worth an estimated US$200 to US$250 million
annually.
An October 2014 global forum on using microfinance to
connect the poor to clean energy and water in Addis Ababa,
Ethiopia, showcased the diversity of partnerships being struck.
Indeed, more than 100 people from 10 countries in Asia and
Africa attended the forum—jointly organized by PAMIGA and
UNCDF—representing a variety of organizations, from energy
companies and financial service providers to governments,
private investors and development agencies.
Over the course of two days, the forum examined and discussed a range of partnership models, particularly those
between energy companies and microfinance institutions, an
area where much has been attempted but results have been
mixed. Such partnerships often consist of energy companies
simply piggy backing on microfinance institutions’ established
client base and branch networks; meanwhile, the microfinance institutions do a minimal adjustment of their existing
loan products to include energy lending. Breaking into the
potential market, however, will take a greater willingness to
explore new ways of doing business by both sets of players.
MAY 2015
main feature story
Microfinance experience offers food for thought for the energy sector
There are several parallels that can be
drawn between the commercialization of
the microfinance sector and the current
growth path of the low-income end of the
energy market. In some aspects, energy
access is where microfinance was more
than a decade ago when the focus was still
on expanding access to financial services
to poor clients. If the distributed energy
sector hopes to reach the masses then
market competition will be inevitable, just
as it was with the microfinance sector.
This means that energy enterprises will
be faced with a similar set of growth
challenges that microfinance institutions
began to face in the mid-2000s, such as
expanding their share of an increasingly
competitive market; meeting customer
demand as they make their way up the
energy ladder and their energy needs
diversify; managing liquidity shortages
given the need for greater working capital,
infrastructure investments and operational
efficiency; managing capital structures
between different sources of funding; and
balancing profitability with social goals.
The ways in which governments, financiers
and development agencies supported the
microfinance sector in setting industry
standards, creating new kinds of products
and processes, training staff and ensuring
consumer protection also offers inspiration
for the energy sector.
Zeleman / UNCDF
Patricia Kawagga,
Photovoltaic Microfinance Coordinator
at Uganda’s Rural
Electrification Agency,
speaks about the
essential role of
government in energy
access.
WHy partnerships are still important
Developing partnerships between different parts of the energy
access value chain will be even more important as the clean
energy and rural water sectors grow in size, according to
Renée Chao-Béroff, Chief Executive Officer of PAMIGA, a
network of locally-owned African microfinance institutions
developing rural finance in sub-Saharan African countries.
Such partnerships “help players discover new ecosystems
it would otherwise take many years to learn about,” she
explains. “We need to recognize that consumers won’t wait
and we must have a sense of urgency about responding to
their demands.”
In 2013, PAMIGA teamed up with Schneider Electric, a multinational electrical distribution company with a global presence
in 100 countries. Their partnership aims to deliver solar powered electricity to more than 100,000 poor rural households
and small and micro-enterprises in up to seven sub-Saharan
African countries by 2017. [To read more about the PAMIGA
and Schneider Electric partnership see page 40.]
“Without the partnership with PAMIGA, honestly I think
Schneider would have taken a lot of time to identify the right
micro-enterprises” to work with, says Joël Lelostec, Business
Development Director for Schneider Electric’s Access to
Energy Programme.
Increasingly, energy companies are offering financing
in-house, a trend that has largely been driven by the availability of digital payment platforms. According to the Consultative
Group to Assist the Poor (CGAP), there are already 25 companies actively using the pay-as-you-go model to sell solar
MAY 2015
energy in Asia, Africa and Latin America. [To read more
about CGAP’s latest 2014 report Access to Energy via Digital
Finance see page 36.] In fact, more than half of the investments made in off-grid solar companies in 2014 went to
energy companies with digital payment plans embedded in
their business models.
By the same token, some microfinance institutions are setting
up energy companies in-house. This allows them to directly
source energy products and develop their own network of
technicians. Such an integrated approach helps to provide
timely installation and aftersales services to clients.
For example, Jeevan Bikas Samaj (JBS), a retail microfinance
institution that is partnering with CleanStart in Nepal, set up
a subsidiary called JBS Urja (a word that means “energy”
in Nepali) that is an energy product distributor, installer and
aftersales service provider. [To read more about JBS’s activities in Nepal see page 14.]
Nevertheless, partnerships between the energy and microfinance sectors remain a relevant and useful way to realize the
full potential of different kinds of consumer financing models.
For example, according to CGAP an estimated three million
pay-as-you-go solar systems will have been sold globally by
2019. This means that pay-as-you-go companies will have a
significant need for capital, which could be partly alleviated by
partnering with small and large financial intermediaries such
as microfinance institutions and banks. These institutions can
then take on some of the capital requirement by underwriting
the cost of goods sold, financing retail-level product distributors
and providing working capital to the pay-as-you-go companies.
In addition, there are only a handful of microfinance
institutions operating in developing countries that are able to
distribute energy products themselves; aggressively providing
asset financing for large segments of the market—for example, the Bangladesh microfinance institution Grameen Shakti
installs 20,000 solar home systems per month—will require
significant new capital and skill sets.
“It felt like a bridge too far for us to get
into financing our own entrepreneurs
so that is one area where we would like
to see partnerships with microfinance
institutions.”
—Nena Sanderson, Director of Services, Off.Grid:Electric
“What we are trying to do through the partnership is to mitigate the risk on the microfinance institution side,” PAMIGA’s
Chao-Béroff explains. Working with Schneider, which is a
global energy company, reduces the risk associated with the
quality and reliability of energy products for institutions new to
the market.
“As I always say to microfinance institution members of our
network, [Schneider] has larger reputational risks than any of
our clients because this is part of its global corporate responsibility programme. They cannot afford to have bad solutions
associated with quality issues,” she adds.
The relationship between energy companies and microfinance institutions becomes even more relevant as consumers
move on to bigger products. Entry-level products such as
solar lanterns are proving to be useful in building consumer
confidence, and oftentimes after this initial phase consumers
start shopping around for larger power products such as solar
home systems that not only charge mobile phones, but can
power televisions or multiple lights. In fact, several of PAMIGA
and CleanStart’s financial institution partners are finding that
clients introduced to small solar kits actually decide to buy
them with cash, with the microfinance institutions’ financing
role only kicking in once they decide to upgrade.
Ramin Nadimi, Vice President of Orb Energy’s Africa operations, agrees. Orb Energy provides solar energy solutions for
a range of market segments using a franchise model. It operates primarily in India and is now expanding into Kenya.
“If the end user needs a solar lantern most likely many of the
customers will not need financing or can get one from the distributor,” he explains. “However, what we find is that needs of
clients change over time. People who bought a small lantern a
year or two years ago need a bigger system that can power a
radio, TV, or more lights. Many of the customers, however, do
not have the capacity to pay upfront.”
The reality of partnerships
At the same time, for these partnerships to work, many microfinance institutions will need significant amounts of capacity
building and risk capital to adapt their business model to support new product lines.
MAY 2015
main feature story
Snapshots of
participants at the
global forum in Addis
Ababa last October.
From the top:
Selome Wondemu of
Microfinance African
Institutions Network
(left) with René Azokly
of PAMIGA; Nicola
Armacost of Arc
Finance; Bouba Ndjidda
of UCCGN (left) and
Umberto Trivella of
Microfinanza; Lamine
Gueye of CAURIE
Microfinance. Photos by
Zeleman / UNCDF
In Nepal, JBS is thinking of introducing a
“decent housing loan” by combining loans
for improved cookstoves or solar lighting
products with loans for basic household
sanitation needs such as toilets and safe
drinking water. Sana Kisan Bikas Bank
Ltd. (SKBBL)—otherwise known as Small
Farmers Development Bank—is another
one of CleanStart’s partners providing
loans to cooperatives in Nepal. It is also
planning to bundle agriculture loans with
biogas loans to address fluctuations in
client demand during the farming season.
Narendra Shrestha / UNCDF
creative loans help bring clean energy to Nepal
Young Nepalese Anita
Pyakurel stands in front
of her house at Bela
village in Kavre District,
Nepal.
“Working capital loans are still the bread and butter for
microfinance institutions,” says Ira Lieberman, Chairperson
of PAMIGA Finance, a financing and investment vehicle for
microfinance institutions in Africa. “Water and energy are
extremely important for rural clients, but growing this portfolio
is going to take a lot of education and transformation of the
capacity of microfinance institutions.”
engagement. They see the energy loans as a one-off thing
rather than a continuous process of bringing their clients into
energy access. Some microfinance institutions do loans for
cookstoves and biogas. In India, a number of microfinance
institutions are getting involved in mini-grids. The microfinance institutions are very good at [money] collection and that
is what mini-grids need when they are linking different households together.”
“Pushing microfinance institutions
to innovate too soon is a mistake.
As facilitators, we need to be very
conscious about what works for that
institution in that country in that
region with that client base.”
Microfinance institutions are finding their own way
Armacost also pointed to a number innovative ways that
energy loans are being processed by microfinance institutions.
Under one model, loan officers do both the collection and
marketing of loans, while other institutions make a point of
separating these two roles. Other microfinance institutions are
outsourcing distribution, marketing and aftersales services to
intermediaries, leaving them to focus solely on financing.
—Nicola Armacost, Managing Director of Arc Finance
Microfinance institutions are becoming more experimental in
the way they offer loan products.
Nicola Armacost, Managing Director of Arc Finance, has been
noticing a number of variations. Arc Finance advises financial
institutions globally to deliver financing solutions for energy
and water.
Microfinance insitutions must also decide whether they will
“We are seeing different approaches and different ways of doing form an exclusive relationship with one particular energy
things,” she explains. “Each business model has shifted and
product supplier or to work with rival suppliers, making the
adapted. Although these models start off looking the same, as it process more competitive.
scales, we are seeing difference between the companies.”
“Before, these decisions were made in isolation, but now
For example, a handful of microfinance institutions in develmicrofinance institutions are sharing information,” Armacost
oping countries provide loans for people to get connected to
says. While institutions with a large client base already have a
the national grid or they offer electricity bill payment services. certain amount of bargaining power, smaller ones can benefit
Some institutions offer loans for a range of solar products, from from networking with each other.
very small lanterns to larger home systems, to help their clients
“The possibilities in energy financing for the poor is big, which
climb up the energy ladder from a tiny light to fully integrated
energy access for all of their household and business electric- is a good thing, but can also be overwhelming,” she adds. “If
we are talking about scale, microfinance institutions need to
ity and cooking needs.
just do it. Start energy lending, don’t try to be fancy, don’t add
However, “some institutions don’t want to go there,” Armacost all the bells and whistles.”
says. “All they want to do is lanterns. It is a different kind of
MAY 2015
Can microfinance institutions take advantage of the digital
payments trend?
With digital payments transforming the way poor people pay
for energy there is a real opportunity for microfinance institutions to become more flexible in the way they do business. For
example, using mobile money means smaller loans can be
processed much more cost-efficiently compared to traditional
face-to-face banking, allowing clients to pay back in much
smaller amounts.
“Five years ago [solar] technology was unstable, capacity was
shooting up. So from the big manufacturers point of view,
just getting involved in the retail chain was risky enough,”
explains Kevin Kennedy, CEO of Clearcape, a consulting firm
that advises on asset lending and leasing. “This has been the
perspective of microfinance institutions as well.”
But with solar technologies now stable enough to be sold in
large quantities financing has become a critical component of
the business.
MAY 2015
main feature story
the Importance of building networks of local technicians
Courtesy of Off.Grid:Electric
The next challenge for the microfinance
institutions partnering with PAMIGA
and CleanStart is to build a network of
trained technicians who can install and
maintain these clean technologies in
the communities where their consumers
live. Microfinance institutions usually
have long-standing relationships with the
communities they serve and will be using
that relationship to identify people who
could be good energy entrepreneurs, or
“village electricians” as Schneider Electric
calls them.
An Off-Grid:Electric
technician in Tanzania
traveling to the next
client.
“The game has changed with where you get data and how you compared to the usual on-the-ground, intensive surveys in
assess credit risk,” Kennedy says.
which company representatives visit every customer, regardless of need.
Nowadays, many poor clients can easily make payments
using their mobile phone, enabling them to build up a pay“Once you take the device home, from the distributor’s point
ment and energy usage history. These data can be a reliable
of view they are done with it and the education or exchange
predictor of future behavior that allows even non-financial
of information hasn’t necessarily happened,” Arch explains.
institutions, like energy companies, to provide financing for
“With pay-as-you-go you can use the data to go back to the
their products and services.
customer’s household and selectively educate the customer
so that they get the highest usage as possible.”
“We all come from a different perspective about customers. The more we start
collaborating and thinking through why those perspectives are unique and important
and relevant to each other the more innovative we can become.”
—Ajaita Shah, Chief Executive Officer of Frontier Markets
“Not only are you getting payment information … with the
solar lantern that has a mobile-payment chip embedded in
it, but you are getting usage and diagnostic data potentially
back,” says Victoria Arch, Director of Strategy at Angaza, a
pay-as-you-go solution provider. “That can be helpful in giving
you tangible, qualitative perspectives on how people are using
the device, and whether people are able to engage with it and
get the full functionality out of it.”
For example, by tracking payment amounts, product providers can keep tabs on the efficiency level of a client’s solar
panel; the provider can then tell from a remote location if the
customer needs to wipe their panel, and send a reminder
SMS message. Thus, companies can save time and resources
MAY 2015
Nena Sanderson is the Director of Services for Off.Grid:Electric, a solar company based in Tanzania. Sanderson’s
company, along with Arch’s, both see a big opportunity
for microfinance institutions to offer financing to solar
microentrepreneurs.
“For us, a financing challenge is getting appropriate money
to our microentrepreneurs in Tanzania—both our service and
sales agents that are in the community doing installations and
providing service,” Sanderson says. “They need working capital to have the tools to make them more productive. Our best
service agents have motorcycles and have invested in ladders
and power tools that enable them to do dramatically more
installations in a day.”
Off.Grid:Electric installs solar home systems in homes and
small shops, and customers pay per use via mobile money.
Service levels start as low as US$0.20 per day and their systems can power bright lights, phone chargers and appliances
such as radios or televisions. The company operates across
three regions in northern Tanzania and is growing quickly.
“It felt like a bridge too far for us to get into financing our own
entrepreneurs so that is one area where we would like to see
partnerships with microfinance institutions,” Sanderson continues. “Another area is appliances. As our systems get larger,
and can power TV and other appliances, those are things that
customers should be buying rather than leasing from us.”
Innovation is not only about hardware
However, the true test of innovation in the distributed energy
market comes not only from the latest hardware, financing
package or the business model, according to Schneider Electric’s Lelostec.
“Having the product is just the beginning,” he explains. “You
need to find the right partner, both the microfinance institution
and distributor, you need to find the right installer, you need
to get the pricing right, you need to find the right place to go,
you need the right financing, the right supply chain. There are
many many things in the complex equation.”
customer and it kills our ability to develop scalable market
solutions,” argues Ajaita Shah, Chief Executive Officer of
Frontier Markets, which provides energy solutions to rural
customers in India. “We need to engage the customer more
to understand their capital constraints, their purchasing
patterns, their willingness to spend on clean energy, their preference for payment options and who should be delivering it.”
Understanding and meeting customer demand should be the
goal at every stage of manufacturing, marketing, distribution
and financing. Doing this can be challenging within a partnership, though, since microfinance institutions and energy
companies might have different ways of traditionally dealing
with and approaching clients.
“We all come from a different perspective about customers,”
Shah continues. “The more we start collaborating and thinking through why those perspectives are unique and important
and relevant to each other we can become more innovative.
The more dialogue we have with consumers in mind, we can
come up with not 1, not 10, but 50 solutions that can be
scaled, customized and be more effective.”
It’s the consumers
However, the number one concern should always be meeting
and satisfying consumer demand.
“The biggest missing element in our discussion is the end
MAY 2015
microfinance institutions
CleanStart’s two financial institution partners in Nepal—Jeevan Bikas Samaj (JBS) and Sana Kisan
Bikas Bank Ltd. (SKBBL)—have big ambitions in expanding access to clean energy for their clients
a diversity of partners allows for greater outreach
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 sources, such
as solar lighting and improved cooking
solutions in the form of biogas digesters.
Its four partners are JBS; SKBBL; Ace
Development Bank Ltd. (ACE); and
Clean Energy Development Bank Ltd.
(CEDBL). Together they have set out to
reach at least 102,000 households and
microentrepreneurs throughout Nepal
by 2017 with CleanStart support. As
of January 2015, these partners had
collectively provided energy loans to
over 10,000 clients, with the bulk of the
loans financing solar home systems of
nepal: one year down the road
CleanStart’s two financial institution
partners in Nepal—Jeevan Bikas Samaj
(JBS) and Sana Kisan Bikas Bank Ltd.
(SKBBL)—have big ambitions. SKBBL
wants the homes of every member farmer,
totaling 384,000 households, to be
smoke-free and lit through solar energy.
JBS aspires to be the Grameen Shakti
of Nepal. It is not only providing energy
loans but also setting up JBS Urja, a
renewable energy company, to provide
the product, the finance and the service
that clients deserve.
In this article, we highlight the early
experiences in energy lending of two
of these two CleanStart partners, both
of which have been impressive in their
proactive approach to meeting new challenges. Here is a glimpse into how they
are doing it.
Who are JBS and SKBBL?
Both institutions operate quite differently.
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 of its districts and SKBBL in
38 districts.
Both have great ambitions. SKBBL wants
the homes of every member farmer to
be smoke-free and brightly lit through
solar energy. JBS has set up a subsidiary
called JBS Urja (which means “energy”
in Nepali) that serves as a one-stop shop
to both market its products and provide
installation and maintenance services to
customers. It has 29 technicians on staff
and provides aftersales service within 48
hours of customer request. As a result,
smaller financial intermediaries operating
near JBS are keen to partner with it given
their distribution and servicing capacity.
CleanStart’s financial partner institutions have distributed many clean energy devices in nepal
10,080 total
1,027
improved
cookstoves
793
biogas
digesters
8,260
solar home
systems
(20 Wp+)
Source: Annual report to CleanStart (April 2014 - January 2015)
MAY 2015
WP = Watt peak capacity
20 watt-peak capacity or higher, which
typically powers four lights.
The mix of institutional profiles is
interesting. For example, ACE and CEDBL
are providing wholesale financing to
microfinance intermediaries of various
sizes, including one of the largest
regulated microfinance institutions that
operates nationally in Nepal and a number
of small financial institutions that operate
at district levels. SKBBL, meanwhile, is a
wholesale lending institution for over 380
farmer cooperatives, while JBS is a retail
microfinance institution focused on seven
districts in eastern Nepal. This diversity
of partners allows for greater geographic
spread, deeper client outreach and a
diverse set of financing models.
Currently, JBS Urja is providing technical assistance and training to a number
of microfinance institutions that have
requested support.
Chatredeurali Village
Development Cooperative in Nepal’s Dhading
District is one of the
hundreds of farming
cooperatives that
SKBBL supports.
Seeing is believing
To boost client demand, SKBBL and JBS
initially focused on building staff and
client awareness about renewable technologies. SKBBL partnered with energy
companies to do product demonstrations
at its regional offices for its 384 member
cooperatives. On one occasion, some 500
people ended up buying solar home systems after a single demonstration event.
The ability to offer a captive market
places SKBBL and JBS in a good position
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 a one percent lower interest rate compared to
their regular credit products. Every bit
helps since many of JBS’ and SKBBL’s
clients are living in grid-connected areas,
making them ineligible for a government
program that offers subsidies to solar
companies selling products in off-grid
areas. These clients are purchasing solar
countryprofile
nepal
financing for energy
“Last October, the manager of one cooperative returned
home with a half dozen solar home systems
to illuminate households during Diwali celebrations.
Her neighbors were impressed and now more than
100 units are installed in the community.”
—Mr. Surya Prakash Hada, Programme Coordinator CleanStart Nepal, SKBBL
home systems as a backup source for an
unstable electricity supply.
Finding solutions locally
JBS and SKBBL continue to see an
increasing demand for solar home systems in the communities that they serve,
while the demand for improved cooking
solutions, including more efficient cook
stoves and biogas digesters, has been
relatively slow. The biggest challenge
comes from the lack of technical expertise available in rural communities in
installing and maintaining these systems.
MAY 2015
Social Good Investing: How and why clean energy enterprises are topping the list
districts covered by SKBBL
Robert Kraybill is the Managing Director
of Singapore’s Asia IIX, an investment
facilitator that helps social enterprises
in Asia access investment capital. IIX
provides these social enterprises with
greater access to much-needed capital in
addition to linking them to other investors,
with the goal of tackling problems in
a number of sectors that are critical
to sustainable growth, including clean
technology and microfinance.
districts where both SKBBL
and JBS are active
CleanStart spoke with Kraybill recently
about the growing interest and excitement
around investing in social enterprises,
including ones in the clean energy and
microfinance sectors.
Who are these social impact investors,
and what drives their investments in social
enterprises?
Furthermore, JBS is finding that biogas
digesters and metallic cookstoves are
still expensive for its clients even after
subsidies. Metallic cookstoves are used
for cooking and space heating in high
hill areas, and a good quality metallic
cookstove can be up to 20 times more
expensive than a mud stove, putting
them well beyond the reach of these
communities; cheaper ones are of poor
quality so people quickly abandon them.
their energy company JBS Urja, a local
biogas digester installation company.
Additionally, JBS Urja’s technicians are
testing different versions of improved
mud stoves with women from the community. Several iterations have been
developed, with a hybrid between a
mud and metallic stove showing some
promise. Meanwhile, in coordination
with the Alternative Energy Promotion
Center, SKBBL is training one person per
“We need to build on the cookstoves that people are
already using. We need to make changes bit by bit.
Every improvement in efficiency counts.”
—Mr. Damodar Regmi, Senior Manager, Department Chief on Institutional
and Social Development Department, JBS
Both companies, however, know that the
best solutions to such challenges can
often be found within the communities
themselves.
For example, JBS is using its training
center in Biratnagar, located in the
eastern part of Nepal and also where
JBS’s head office is, to train local people
who have engineering skills on installing and maintaining biogas systems.
JBS is also looking into buying, through
MAY 2015
cooperative on how to produce improved
cookstoves.
JBS is continuously seeking ways to
develop better models of cookstoves with
the help of its clients. For example, JBS
is working with the village development
committee of Letang, a municipality
located close to Biratnagar, to create the
first smoke-free village in south-eastern
Nepal by installing improved mud cookstoves in about two dozen houses. If
the cookstoves prove to be popular with
users, JBS will provide more financing, together with the development
committee.
Going forward, JBS and SKBBL foresee
a growing demand for larger solar systems. SKBBL’s small farmers are putting
their newly acquired solar home systems
to productive use by installing them in
poultry farms and veterinary shops. Several farmers have been inquiring about
loans for solar irrigation pumps and
solar-backed systems for public facilities
like computer institutes. JBS is already
providing loans for systems that can produce 150 Wp.
The experiences of JBS and SKBBL
so far demonstrate that there really is
no one-size-fits-all approach to energy
lending. Subsidies, while helpful in
boosting market demand, are not and
should not be the primary driving force
behind microfinance institutions getting
into energy lending in Nepal. It should
be about fulfilling market demand and
providing better customer service. Where
there is demand, microfinance institutions are ready to go out and find the
right partners using their community
base as a valuable source for solutions
that make local sense.
There are so many different motivations
for investors in this space and we do
see a real spectrum of investors. I think
there are some who are willing to do just
that, with a primary focus on the social
return, and with less insistence on market
returns. I think that’s fantastic. However,
if we are really going to accomplish what
we’re aiming for, which is taking impact
investing from niche to mass, we need to
realize there are perhaps a larger group of
investors out there who are keen to have a
social impact but they’re either unwilling or
unable to sacrifice on the financial return.
Of course the biggest group of investors
in this area would be the institutional
investors, such as pension funds,
superannuation funds and others that may
have a regulatory or fiduciary obligation to
seek maximum financial returns but may
very well have a clear desire to seek social
impact as well.
How would you describe the level of
investment in the clean energy sector right
now?
It’s a major focus area of ours, particularly
clean energy access. Not necessarily
the big wind farms or big solar farms but
projects that bring clean energy to rural
areas that otherwise would be in energy
poverty. In addition, it combines with a
very strong environmental impact. We
also see it as a sector where there’s a lot of
opportunity for the market to work, and so
you see that beautiful intersection where
you can have a financially sustainable,
financially viable business that delivers
social and environmental returns.
How do investors react when they learn
about the clean energy sector’s potential
in Asia?
We’re always surprised at how large the
potential is. We have to remind ourselves
just how many millions of people there are
without access to modern clean energy in
the developing markets of Asia. It’s always
useful to go back and remember these
aren’t small markets, these are very, very
big markets.
If you just think about lighting, there’s
demand at the very low end for a solar
lantern and charging, and there’s demand
for household systems. Demand also tends
to increase over time. It’s not a market that
you saturate, where people have enough
energy and then you’re done. The demand
for electricity and power tends to grow over
time.
What are the reactions from your investors
to opportunities in clean energy? Has there
been an obvious increase in interest by
them?
Success breeds itself. We always celebrate
innovation but also as important as
innovation is taking an idea and scaling it
up. One of the ideas we’re starting to see
more and more is that of taking an idea
that has worked in one area and making
it work in another area, in another state
or country. Entrepreneurs see something
that has worked in India. I can do that they
say, I can invest in a similar [enterprise]
in Myanmar. As there are proven success
models, it feeds on itself.
Dunlop / UNCDF
Districts in nepal where SKBBL and JBS are active
Robert Kraybill speaking on social investing
at CleanStart Connect
2013.
they say it should be entirely financially
sustainable from day one with no
[government] subsidy or aid whatsoever.
But we shouldn’t expect that. There’s
a spectrum between a fully donorfunded programme where cookstoves
are given away for free and a completely
sustainable programme that relies on no
aid whatsoever. There’s a lot of space in
between.
There continues to be a role for donor
governments, for example in helping
enterprises get ready to access capital.
We often encounter social enterprises
that don’t have a proper business plan or
financial model. There’s a fair bit of work to
get them ready. Donor funding can bridge
that gap. We see that as an area that’s
critically important: providing technical
assistance to a social enterprise and
helping to get them ready for an investor.
From where you sit, what sort of potential
do you see for significantly more private
sector involvement in development work, a
domain that has traditionally belonged to
governments?
It’s not an either/or question. Too often,
when people look at social enterprises
MAY 2015
firstperson
investing in cambodia’s energy future
Sun-eee seeks to bring electricity to thousands of people in under-developed areas of Cambodia
Sun-eee Pte Ltd. is a Singaporean
registered energy company operating
in rural Cambodia. It seeks to bring
greater energy access to the rural
poor while tackling the environmental
problem of a reliance on cheap diesel
fuel. In 2013, it successfully attracted
a US$450,000 investment from angel
investors in Singapore that allowed it to
move forward with its goal of acquiring
a number of independent power producers and aggressively expanding the
country’s transmission line network. As
a result, Sun-eee can now offer affordable, reliable power to underserved
markets and help to improve the lives
of thousands of rural Cambodians.
CleanStart recently interviewed Sov
Leang, Sun-eee’s founder, about the
potential for investing in Cambodia’s
energy sector in a way that is both
socially conscious and profitable.
How is Cambodia’s energy supply
managed?
In Cambodia there is a single leading utility owned by the government,
Electricité Du Cambodge (EDC), which
only operates in the country’s main
towns and cities and along the national
MAY 2015
roads network. In rural areas, energy is
provided by around 300 different Independent Power Producers and Rural
Electric Enterprises, each operating
within their licensed areas.
The Electricity Authority of Cambodia,
an autonomous government agency, is
responsible for issuing and enforcing
regulations regarding the electricity
sector, while the Ministry of Industry,
Mines and Energy is responsible for
preparing policies, strategies and plans
for the energy sector.
Only around 30 percent of households
in Cambodia have electricity and
demand for energy access is growing
quickly. That demand is difficult to
meet, however, because of high prices
and a dependence on imported fossil fuels. In addition, the majority of
communities outside the main metropolitan regions are not served by the
national grid.
Currently, in terms of renewable, offgrid sources of energy in Cambodia,
there exists a lack of marketable green
energy technologies as well as the
financing necessary to make it accessible to the general public. Nevertheless,
a number of renewable energy companies are trying to increase people’s
access to energy and, in order to
do this, they are exploring “impact
investments.”
What is an impact investment and how
does it work?
Impact investing is a form of socially
responsible investing, in which an
investment is meant to bring about
snapshot
In Cambodia, 80-85% of the total population lives in
rural areas; per capita consumption of electricity is about
50 kWh per person per year; the electricity supply is
fragmented into 24 isolated power systems, all fully
reliant on diesel power plants.
Source: Cambodia Country Report—Status of Sustainable Energy Related
Technology and Policy in Cambodia
measurable social or environmental
impact along with a financial return.
Impact investments are made in both
developed and emerging economies
and guarantee returns that range from
below-market to above-market rates.
A hallmark of impact investing is the
commitment of the investor to measure
and report on the investment’s social
and environmental performance and
progress.
Courtesy of Sun-eee
Courtesy of Sun-eee
Sun-eee employees
installing meters in
the village of Prey Poh,
Prey Veng Province,
as villager customers
watch.
Sun-eee is one of the very few—if not
only—power utilities in Cambodia that
have benefited from impact investments, which has allowed the company
to grow by as much as 1,000 percent
in the first year. However, the process
of getting the company to where it is
now has been quite challenging and
frustrating.
For example, there is a general
assumption that investment funds,
Impact investing has received increasing or so-called philanthropic funds, are
attention in recent years as a potential
easily obtained by companies that want
way to unlock substantial for-profit invest- to make a social impact through their
ment capital to address pressing social
business model. But typically funds are
and environmental challenges.
looking at more than 40 percent internal rate of return for investments in
It sounds like impact investors aim to
Cambodia and a more than 30 percent
achieve social goals according to the
overall return rate, which is a challenge
principle of “doing good while doing
for many small companies. It is particwell,” which seems like a clear win-win ularly difficult for first-time applicants
situation. But is this the case on the
or for investments in the more rural
ground?
regions of Cambodia.
Our experience has shown that,
although impact investors are indeed a
potential financing partner for bringing
about measurable and sustainable
social change, the on-the-ground
reality may not translate easily into
investment deals.
After more than a year and a half,
Sun-eee finally managed to attract
US$450,000 in 2013 from Singaporean angel investors, enabling the
company to purchase its first license
to become an authorized independent
power producer in Cambodia. The
company is now providing over 4,000
households, totaling 30,000 people,
with access to power for the first time
in their lives.
Although impact investors present a
promising option for many emerging
enterprises, real gaps remain.
How could UNCDF help to bridge
these gaps?
UNCDF could help small social enterprises like Sun-eee to partner with
microfinance institutions, which would
provide villagers with the financing they
need to initiate their power hook-ups
and develop the kind of market that
impact investors are interested in. It
could also assist small companies with
business development and in finding
bridge loans, which are short-term
funds that bridge the gap between dayto-day operations and the final closing
of a pending investment deal.
UNCDF should plan for a medium- or
long-term intervention, lasting at least
five years, as there is a lot of work to be
done in helping to connect social impact
companies with impact investors.
MAY 2015
We, the UNCDF team, extend our heartfelt well wishes to
all our partners and the people of Nepal who have been
affected by the devastating earthquake of 25 April, 2015.
Solar panels on the
roofs of several houses
in a small town in
Sindhuli district. Photo
taken in 2013. Sinduli
was one of the districts
affected by the recent
earthquake.
Narendra Shrestha / UNCDF
Nepal is near and dear to our heart. For CleanStart, Nepal is the first country we experienced first-hand
the excitement of working with partners to make clean energy accessible for many more people. This
work will no doubt continue with our partners, and now with an even greater sense of urgency.
countryprofile
countryprofilenepal
ethiopia
Decentralized clean energy becomes an obvious choice with the Government of Ethiopia aiming to achieve
middle-income status by 2025 through carbon neutral economic growth
cleanstart snapshot
Funding
$3.1 million over five years (2015-2020).
Beneficiaries
291,000 low-income households and
microentrepreneurs will have access to clean
energy through microfinance.
technology options
Solar lanterns
solar home
systems
improved
cookstoves
biogas digesters
Catalyzing financing to achieve carbon neutral economic growth for all
To continue fueling the country’s economic growth, the Government of
Ethiopia is investing heavily in building a
sustainable energy infrastructure. Ethiopia’s installed grid-connected capacity is
expected to increase by nearly 10 times
between 2013 and 2020.
guarantee a steady supply of energy. On
average, Ethiopia’s national grid experiences power interruptions twice a week
lasting between four to six hours each
time. Moreover, at least 88 percent of its
population use traditional biomass for
cooking, mostly firewood that is collected
from nearby forests.
What traditional lighting and cooking
solutions are people using?
In 2013, the World Bank and the
International Finance Corporation
Lighting Africa programme conducted
a consumer survey on lighting among
In fact, the Government of Ethiopia’s
households and small- and medivision for the next decade is to become
um-sized enterprises in Oromia, Amhara,
a middle-income, climate-resilient
Tigray and the Southern Nations, Nationeconomy by 2025. Widely known as the
Climate Resilient Green Economy (CRGE) alities, and Peoples’ Region. Kerosene
lamps, candles and dry cell batteries
initiative, the goal is to achieve carbon
were the most commonly used energy
neutral economic growth by limiting
greenhouse gas emissions in year 2030
to around today’s level at 150 million
metric tonnes of carbon dioxide equivasnapshot
lent (Mt CO2e).
However, Iess than a quarter of households in Ethiopia have access to the
nation’s power grid, a number that
drops to five percent in rural areas.
Moreover, connection to the grid doesn’t
MAY 2015
sources for lighting. Not only were the
households dissatisfied with these
sources, but they were expensive to
use. Close to 12 percent of the reporting
households’ monthly expenditure was
spent on kerosene or dry cells for lighting and phone charging.
What is the current market for off-grid
lighting and improved cooking solutions?
Solar Lanterns and Home Systems
Although Ethiopia’s solar market is relatively young and has yet to develop any
particular industry leaders, it is growing
at the rapid rate of 15 to 20 percent a
year. The biggest demand for off-grid
solar home systems comes from the
cash crop growing areas in southern and
eastern Ethiopia, such as Jimma, Sidama and Hararghe.
Over 1 million solar lanterns, 80,000 solar home
systems and 8,000 solar water heaters have been
distributed so far in Ethiopia.
Source: UNDP-GEF
Over the last decade Ethiopia’s economy
has grown at a consistent annual rate of
around 11 percent, double the average
economic growth for other countries in
sub-Saharan Africa. In 2014 it was one
of the top 10 fastest growing economies
in the world.
Alcohol is brewed over
firewood for a family
business in Arsi Negele,
Ethiopia. The brewed
alcohol is then kept
warm over fire powered
by biogas.
MAY 2015
survey shows a high demand for solar products
off-grid households surveyed were interested in solar products but few
can afford the purchase in cash
snapshot
Energy spending accounts for 11% of a
household’s average monthly consumption
expenditure (in US$)
Over 4 million improved
cookstoves have been distributed in
Ethiopia.
of the off-grid
households
surveyed . . .
Adi Alemu shows off his
biogas tap. He installed
a biogas digester with a
loan from Oromia Credit
and Saving Company
three years ago. He
lives in Abono Gebrel,
Ethiopia, with his wife
and their six children.
According to Lighting Africa, there are
less than 15 solar photovoltaic equipment suppliers in Ethiopia, with six
companies supplying 90 percent of the
market. Only a handful of companies
directly sell off-grid lighting products to
consumers, and most have been active
in rural areas for only a few years.
Improved Cookstoves
At least 70 percent of people in Ethiopia
collect wood for cooking and use locally
constructed stoves, typically made of soil
and cement.
According to the Global Alliance for
Clean Cookstoves, the Ethiopian
cookstove market has been able to disseminate 4.4 million stoves over the last
5 years, most priced between US$4 to
US$8 (ETB 85-160).
A driving force behind the progress in
the improved cookstove market has
been the ambitious plan of the Ministry
of Water Irrigation and Energy to disseminate 9.4 million improved cookstoves
between 2013 and 2016 in every region
and city of Ethiopia.
In fact, the Government of Ethiopia and
its development partners have made
significant investments in recent years
MAY 2015
into building up the capacity of local
cookstove producers. Today, an estimated 645 cooking and baking stove
manufacturers operate in Ethiopia, many
of them profiting from a joint government and international development
programme that provides training and
start-up capital.
Source: Global Alliance for Clean Cookstoves
Biogas technology is old and therefore
stable. It is also well known in Ethiopia
since being first introduced well over
30 years ago. Since 2008, the National
Biogas Programme of Ethiopia has
constructed more than 7,000 biogas
digesters, and as of 2013 more than 20
small- to medium-sized biogas digester
construction companies have set up
What is notable is the range of localshop in the districts of Oromia, Amhara,
ly-designed cookstoves on offer,
Tigray and the Southern Nations, Nationparticularly those catering to an essential
alities and Peoples’ Region.
cooking requirement for Ethiopians: baking injera, a spongy flatbread that is a
Installing a biogas digester can be
staple in the country.
quite costly for low-income households. The average cost of a six cubic
While trained local technicians and
metre biogas digester is about US$730
manufacturers exist, the distribution netalthough it can go down to US$600 in
works still need to be built out to reach
some regions. To help address this, the
the most remote parts of the country.
National Biogas Programme worked
with the local energy bureau of Oromia
Biogas Digesters
to provide biogas loans through microfiCattle and water are vital for operating a
nance institutions.
biogas digester. A typical family-size biogas digester of six cubic metres requires
the dung of at least four cattle and year- Financing for consumers and energy
enterprises
round access to water. This bodes well
for Ethiopia where the livestock popuFinancing for consumers and energy
lation is one of the largest in Africa. In
businesses is critical to expanding the
fact, 77 percent of farmers own cattle,
distributed energy market amongst the
although this proportion varies widely
rural poor and to capitalize on the marthroughout the country.
ket’s full potential.
. . . 85% are interested
in purchasing
solar products . . .
. . . but 85% of those
interested need
credit to afford them
$7.85
$68.85
$4.50 on dry cell for lighting
$2.05 on kerosene for lighting
$1.30 on phone charging
Source: Lighting Africa Program Ethiopia Market Intelligence, June 2013
Consumers
According to Lighting Africa’s 2013
research, the estimated demand
for solar lighting loans in Ethiopia is
US$952 million. In comparison, the total
gross loan portfolio of Ethiopia’s microfinance industry is only US$715 million.
Lending to the energy sector is a market
that microfinance institutions in Ethiopia
cannot ignore, but they will need help to
make it happen.
The National Biogas Programme for
Ethiopia has partnered with two microfinance institutions—Oromia Credit and
Saving Share Company and Wasasa—to
provide biogas loans to clients. The
Programme financed half of the biogas
digester construction through a subsidy, while consumers could finance
the remaining half through a loan from
either Oromia Credit or Wasasa.
benefit from a credit scheme. Mirt stoves
or Rocket stoves for commercial use
cost US$35 to US$50 and the market
price for industrial baking ovens is in the
range of US$200 to US$900.
top four reasons people want to buy a
solar lighting product:
portability
improved
light output
ability to
charge phones
safety and
ease of use
Energy enterprises
A fairly large scale solar lighting product
supplier in Ethiopia requires a credit
of about US$200,000 every quarter to
import solar products, locally manufacture components and assemble solar
lighting products. In particular, these
solar companies that import parts find
it difficult to get hard currency credit,
which they need to place orders abroad.
In addition, smaller distributors or dealers that operate at subregional levels also
need smaller amounts of working capital.
Solar lighting distributors typically need
about US$2,000 to US$3,000 every
month to stock up on inventory and
Credit demand from households for
meet other operational needs. Improved
purchasing improved cookstoves is likely
cookstove producers and biogas digester
to be low, simply because the price of
installers also need capital to expand
most household level improved stoves
their production capacity.
is in the range of US$5 to US$10 and
However, the reality is that collateral
is affordable enough to be purchased
requirements from banks and microwith cash. However, small businesses
finance institutions—which tend to
such as injera bakers or restaurants
that use commercial-sized stoves would include guarantees on salary, house
MAY 2015
CleanStart’s guarantee fund provides partial guarantees to encourage lending to energy businesses
The fund that CleanStart is setting up with the Development
Bank of Ethiopia will partially guarantee capital going to energy
enterprises both large and small.
Remaining collateral
commercial
banks
A woman cooks with
biogas. Her biodigester
was installed with
a loan from Oromia
Credit and Saving Share
Company.
and company stock—are too stringent
for small- to medium-sized businesses.
Even stove producers and biogas
masons who operate locally and who
could be an attractive client base for
microfinance institutions typically need
to provide collateral for up to 100 percent of the loan amount since it is a loan
being made to an individual.
How ready is the financial sector to
provide credit?
Ethiopia’s financial sector is relatively
small by global and regional standards
and has been historically dominated by
government-owned financial institutions,
although several private sector banks
have become prominent in recent years.
The microfinance sector in Ethiopia
is well developed, with 31 licensed
microfinance institutions operating in
the country, serving nearly 3.27 million
active borrowers and carrying a loan
portfolio of US$715 million (ETB 14.3
billion).
Microfinance institutions in Ethiopia
typically operate at the regional level,
with the largest one in each region often
owned or backed by the respective
regional government in conjunction with
MAY 2015
Development
Bank of Ethiopia
non-governmental organizations (NGOs).
With close to a million active borrowers, Oromia Credit and Saving Share
Company is the country’s largest microfinance institution.
The Rural Electrification Fund
To inject much needed liquidity into the
rural energy market, the Development
Bank of Ethiopia (DBE) set up a lending
Partial credit
risk guarantee
up to 50% of
loan principal
microfinance
institutions
guarantor
Average loan size:
US$2,000
large national/
regional energy
companies
small local/
district energy
suppliers
Remaining collateral
facility for microfinance institutions and
energy businesses in 2012. The fund
provides soft loans to microfinance institutions and energy enterprises to boost
consumer financing and supply chain
development for renewable and efficient
energy products.
Several private sector microfinance
institutions operate too, although they
are smaller in size. Also, there are over
This US$20 million fund is part of the
39,000 cooperatives and credit unions in Rural Electrification Fund, which is also
Ethiopia.
administered by the DBE, a specialized bank owned by the government to
Like the country’s banking sector,
finance development activities in the
most microfinance institutions need
country.
significantly more liquidity than what
is available in the market today. While
government-affiliated microfinance institutions are reinforced by equity finance
from regional governments, non-governmental microfinance institutions face
significant loan capital constraints. At
the same time, very few commercial
banks are willing to lend to microfinance
institutions, and only rarely do this if fully
guaranteed by either an international
development agency or government
authority.
Credit Risk
Guarantee Fund
(~$1.4 million)
Average loan size:
US$200,000
DBE’s credit to microfinance institutions
under this project is highly concessional,
with market-based interest rates being
determined by DBE on a case-by-case
basis, based on their credit profile and
risk assessment.
The Fund has either disbursed or
approved funding to five microfinance
institutions: Oromia Credit and Savings,
Wasasa, Amhara Credit and Savings
Institution, Dedebit Credit and Savings Institution and Omo Microfinance
Institution. Together, these institutions
cover Ethiopia’s four largest regions
of Oromia, Amhara, Tigray and the
Southern Nations, Nationalities and
People’s Region. Except for Wasasa,
the institutions are all linked to local
governments.
Oromia Credit and Savings and Wasasa,
which primarily operates in the Oromia
region, were the first two institutions to
receive funds in August 2013.
In addition to microfinance institutions, DBE has also approved and
disbursed funds from this credit line to
energy enterprises. Loans ranging from
US$47,500 (ETB 950,000) to US$1.96
million (ETB 39.3 million) have been
approved for seven companies that
assemble and distribute mainly solar
lighting technologies in Ethiopia. As of
April 2014, over 80 percent of the loans
approved to six of these seven suppliers
have been disbursed.
However, loan approval and disbursement to energy enterprises has been
limited so far because suppliers find it
difficult to raise the necessary collateral
and equity contribution to access DBE
credit.
In addition, DBE’s minimum loan size of
US$2,500 is higher than what smaller
enterprises can absorb as working
capital. These are the micro-sized and
small businesses that operate locally,
distributing the products of larger solar
companies or manufacturing improved
cookstoves and biogas digesters. These
local entrepreneurs find it even harder
to meet DBE’s stringent collateral and
equity contribution requirements.
CleanStart in Ethiopia
Ethiopia is the second country in Africa
where CleanStart is operational, after
launching a similar initiative in Uganda
in 2014. CleanStart will work in Ethiopia for the next five years (2015–2020)
to connect 291,000 low-income
households and microentrepreneurs—representing around 1.4 million
people—to renewable energy technologies through the use of microfinance.
It will provide risk capital and technical
assistance to financial service providers
and energy enterprises so that capital flows throughout the supply chain
become more efficient and low-income
consumers are better served.
and reduce some of the stringent collateral requirements that have hindered
loan uptake.
CleanStart in Ethiopia will be implemented in partnership with a United
Nations Development Programme’s
(UNDP) Global Environment Facility
project that starts in 2015.
The Ministry of Water, Irrigation and
Energy is the key government counterpart and coordinating agency. Through
these activities CleanStart hopes to
demonstrate that financing renewable
energy technologies for the poor is not
only a necessity but a viable business
proposition.
The long-term vision is to integrate the
financing mechanisms tested through
CleanStart into the financing facility of
the Government of Ethiopia’s Climate
Resilient Green Economy strategy,
which aims to achieve carbon neutral
economic growth by 2030.
CleanStart will also set up a guarantee
fund with the Development Bank of
Ethiopia to partially guarantee capital
investment or working capital loans to
energy enterprises. This should encourage local banks and microfinance
institutions to lend to energy businesses,
MAY 2015
firstperson
Oromia Credit and Saving Share Company
Cash boxes and pass
books stacked up in
Oromia Credit and
Saving Company branch
office in Meki, Ethiopia.
Oromia Credit and Saving Share Company is one of the largest microfinance
institutions in Ethiopia, reaching more
than 800,000 clients through 301
branches. For over three years now,
Oromia has been offering a biogas loan
product to its customers both on and
off the energy grid in the eastern state
of Oromia, where raising cattle and
other livestock is one of the economic
mainstays of its population, second
only to growing coffee.
Biogas and the biodigesters that create it provide a sustainable source of
energy for the poor in Ethiopia. They
rely on animal dung fuel instead of kerosene, wood or charcoal, thus reducing
rates of deforestation and carbon emissions while improving air quality. It also
allows homeowners to use a cheap and
ready-made source of fuel.
Oromia Credit and Saving has plans to
start offering a similar loan option for
the purchase of solar home products.
Currently, it offers what it calls alternative energy financing to 18 districts in
Ethiopia, with plans to expand to 70
in total. CleanStart spoke with Tefera
Tesfaye, the company’s District Director.
MAY 2015
What response did you get from your
existing clients when your company
decided to offer the biogas loan?
The communities in our target area
were very interested in this product,
one because of cooking and two
because of lighting. They can have
light but also improve their health
conditions. For women, they especially
welcomed this loan product. They are
worried about air quality; there is a big
difference between cooking with wood
and cooking with biogas … they say it
is clean, no health problems, and their
productivity is increased.
How many customers do you have for
your biodigester loan product? Why
would people take out a loan for a
biodigester?
We are providing loans to 286 households, with a total loan disbursal of
US$83,520 (ETB 1.7 million). All
of our clients are household clients.
The importance of biogas is different
between women and men. Usually
it’s the female doing the cooking and
managing the household, so they give
much more attention to the biogas
digester.
Since you first started offering this
loan product over three years ago,
are there any lessons learned you can
point to?
The lessons we learned is one: This
biogas product is very important to
businesses because of the income
generation potential. And two: There
is demand and therefore we need to
expand the coverage of this product.
People can afford it and use it, so why
not just expand it to other areas?
What is the average size of a household loan for this product? Does
the loan cover the entire cost of the
biodigester?
Loans are on average US$294 (ETB
6,000) per household. There is a subsidy provided by the government for
the cost of construction. The client can
contribute some of the local materials
such as stones and bricks.
How exactly does your loan product
work, and what is the average length of
a loan?
Though we decided the maximum loan
term is two years, it depends on the
Gebeyehu Eshete is a chemistry teacher and
the proud owner of a biogas digester that he
purchased with a loan from Oromia Credit and
Saving Share Company. He teaches his students
about the chemistry behind biodigesters, and is
often visited by other people who are considering the purchase of one. He is always quick to
explain that it is affordable, clean, easily fueled
by cow manure and a boon to the environment.
“The fuel is quite cheap, and it can come from
animal byproducts, which people just throw
away,” he explains. “Biogas is very important to
our family.”
cash flow of the client. If the client is
better off and has some cash flow we
can make it one year. Otherwise the
maximum loan time is two years.
Are you targeting your existing
customers?
Yes. We are using them and their
households as a demonstration site.
If someone wants to visit this household these people can be one of our
ambassadors. They can tell how they
are using the biodigester, why they are
using it, and what benefits they obtain
from the biodigester and the loan for it,
as both a household owner and as our
customer.
Of all the different kinds of loans you
offer, which is the biggest part of your
portfolio?
The biggest portfolio we have is agriculture related. Loans for micro- and
small enterprises are our second
largest portfolio. This one is quickly
growing because there is high unemployment in every town. To reduce the
unemployment rate in urban areas
we provide financial access so people
can create their own business and can
Alternative Energy Financing: Both a social obligation and a sound investment
generate their own income, not only
for themselves but also for others who
work for them.
company because we will increase our
clients by providing this product to our
community.
What about loan products for solar
home systems? What is your company
doing with that?
Is there anything else you would like
to add?
We are focusing on biogas first, and
then we will diversify our alternative energy source financing to solar
energy. Solar is very important and
it can be purchased at an affordable
price. We are still negotiating an agreement to provide this product to our
client.
How many microfinance institutions in
Ethiopia understand the potential or
the importance of working in alternative energy?
We are striving to provide alternative
energy financing not only for profit. We
have a social obligation to introduce
these loan products to our community
so they can use alternative sources
of energy. We can rejuvenate our forest conditions and it can also help to
improve the health of farmers and of
the community. I recommend all communities to use alternative energy, not
only the ones off-grid but also on-grid.
They will have a substitute [source of
power] if there is an outage.
There are more than 30 microfinance
institutions operating in Ethiopia, and
a number of them are already involved
in providing loans for this alternative
energy source. Some of them clearly
understand the importance of these
biogas and alternative energy sources.
There is a huge demand for energy.
If there is a huge demand for energy,
there could be a huge benefit for the
MAY 2015
Why are charcoal stoves preferred for making coffee?
What are the main drivers of the National Improved
Cookstoves Programme?
The main driver is Ethiopia’s national Climate-Resilient Green
Economy strategy. The cookstoves programme supports two
of the strategy’s main pillars. One is reducing greenhouse
gas emissions by avoiding further forest degradation, and the
other is producing more energy from renewable resources.
As many as 94 percent of Ethiopians rely on traditional fuels to
meet their cooking needs, mainly wood, charcoal and animal
dung. The insatiable demand for fuel wood undermines gains
from large-scale reforestation campaigns intended to restore
Ethiopia’s severely depleted forest cover; it also leads to high
levels of greenhouse gas emissions.
Add to this the additional challenges of energy poverty and
the major health issues associated with poor indoor air quality
from smoke-belching stoves, and it is clear why the country launched an ambitious national initiative to scale up the
use of more efficient cookstoves. Indeed, Ethiopia’s National
Improved Cookstoves Programme aims to place an additional
9.415 million improved cookstoves in homes by 2016.
Why do many households in Ethiopia have three or four
stoves?
In Ethiopia we use multiple stove types for different kinds of
purposes. One kind of stove is for baking injera. This food is
the main part of our diet and is served frequently. It’s unique
MAY 2015
Zeleman / UNCDF
CleanStart Connections met with
Abraha Misghina, the head of Ethiopia’s
National Improved Cookstoves
Programme within the Ministry of
Water, Irrigation and Energy, to learn
what makes the country’s household
energy challenge so unique.
These are the two biggest driving forces, but we have other
comparably important development goals, including reducing
indoor pollution, which is comparable to malaria in terms of
fatality rates. The Programme is also encouraging income
generation by assisting cookstoves producers in building their
business and production capacities.
to Ethiopia so stoves from other countries cannot accommodate its preparation. We have a number of different brands of
cookstoves specifically for injera and they’re made of different
materials and use electricity or different fuels. So Ethiopians
need a special stove only for baking injera in every household.
We often cook sauces, as well as heating and boiling water
for different purposes, and for that we can use electric stoves,
if covered by the national energy grid. But when there is a
power blackout, you need to have an alternative stove to do
any ordinary cooking, so we have gas stoves also. These are
fuelled with liquid petroleum gas or kerosene. Where there’s
no electricity—which is in most parts of the country—open
fires are typically used unless, of course, a household has an
improved cookstove.
Roasting coffee may be done on any of these stoves, except
for electric ones, and for the specific purpose of boiling coffee we normally use charcoal stoves, at least in urban areas.
Ethiopia is one of the very few countries where coffee is boiled
and roasted on the spot in every household.
Another goal is the empowerment of women and children,
and the growth of household incomes. By using fuel more efficiently, you are going to save money spent on fuel or save time
spent collecting firewood. So you’re going to buy extra time for
children to study their lessons and for women to participate in
community meetings and use the time for other kinds of productive work.
“The Programme’s priority is to promote
improved injera stoves that burn biomass
in a cleaner and more efficient way, and the
market is quite immense and growing.”
So at this time, and probably for a reasonable time into the
future, clean technologies using biomass are the country’s
priority, such as more fuel-efficient wood and charcoal stoves.
Additionally, the improved electric cookstoves—where electricity is available—and solar cooking solutions in remote, off-grid
areas currently on the market in Ethiopia provide remarkable
benefits to both urban households and rural ones where there
is no biomass fuel. For example, Ethiopia has many remote,
arid areas where we want to promote reliable solar solutions.
What is the Programme’s focus at the moment?
The focus of our current phase is on coordinating the efforts
made by various market players such as producers, distributors, government organizations and NGOs in the adoption
and dissemination of improved cookstoves to make sure the
products better meet household cooking needs and quickly
reach the communities most in need. We distribute and promote improved cooking technologies, whether they involve
biomass, electricity, biogas or biofuels. We are open to any
type of fuel (except fossil fuels) or technology, so long as it’s
clean and meets mandatory international standards. All these
efforts, whether by government stakeholders or private NGOs
and entrepreneurs, have to be coordinated in such a way
that it helps achieve our national goals for household energy
development.
Leading light:
ABRAHA MISGHINA
When we boil coffee in our traditional pots it needs to be
boiled gradually. It’s not just a case of boil and drink. Charcoal provides radiant energy, which allows for that process.
Additionally, you cannot roast the beans on an electric stove
because you need to have a flame or high radiant energy that
is distributed uniformly on the bottom of the roasting pan. It’s
because of this tradition that most households in Ethiopia own
a charcoal stove or other non-electric stove serving this purpose, even in Addis Ababa.
the household level, and most of the supply comes from traditional biomass sources such as virgin wood, crop residue, cow
dung and charcoal. So the idea is that to reach the majority
of Ethiopians, the best immediate solution is to help them use
more efficiently what they already own. These are people who
are suffering from energy poverty, household pollution and all
the associated problems that come with substandard energy
access.
A woman in Lalibela,
a town in northern
Ethiopia, cooking her
injera over a traditional
stove.
Of all the new ideas for improved cookstoves, which ones
stand out?
Most of our national energy demand and consumption is at
MAY 2015
countryprofile
nepal
firstperson cementing
a cleaner baking future in ethiopia
A group of stove producers in Ethiopia dream of building a Mirt stove industry one stove at a time
snapshot
Since 85% of Ethiopia’s estimated 17 million
households still use firewood for cooking, the total
market size for improved cookstoves is 14.45 million
households. The government plans to distribute
9.4 million improved and energy efficient cookstoves
by 2016.
To what extent is the demand for improved injera biomass
cookstoves affected by the expansion of the electricity grid?
In bigger cities and towns where there is electricity, households
are replacing these stoves with electric ones because our electricity comes from mega-hydropower and so is very cheap. Our
electricity rates are probably the cheapest in the region.
However, more than 80 percent of Ethiopia’s population live
in rural and remote locations, many of which are off-grid. Of
course, the Government is rigorously expanding the grid but not
at a rate that will cover all of Ethiopia’s 90 million people anytime soon. So the Programme’s priority is to promote improved
injera stoves that burn biomass in a cleaner and more efficient
way, and the market is quite immense and growing.
What role can the finance sector play in supporting the
Government’s agenda?
In Ethiopia we are approaching renewable energy development
in a vigorous manner. There’s a very big market for financial investors as well as industrial investors. There are some
limited loans available for energy projects, and also aid from
different NGOs. There is bilateral government-to-government
collaboration with other countries with a common interest in
reducing greenhouse gas emissions. Carbon financing is not
yet being used much in Ethiopia but it will be in the future.
The Government is also helping entrepreneurs active in the
renewable energy sector by helping to develop the necessary
infrastructure and providing training programs, loan and credit
arrangements and tax exemptions.
So everybody coming into this area is welcome and essential.
The Programme has established itself and will be in operation
MAY 2015
until 2030, phase by phase, scaling up at different levels. It’s a
huge programme and it is attracting a number of development
partners from abroad as well as locally. Our view is that everybody, including the finance sector, is welcome to participate,
contribute and help achieve results.
Can microfinance support the uptake of improved cookstoves?
This is a good opportunity for the microfinance area, particularly because other financing solutions aren’t readily available.
Energy entrepreneurs here are mostly small and micro-level.
The financing power they require is not huge. At the same
time, though the loans may be small and the margins may be
small accordingly, there’s a massive demand so I would think
there’s a very big scope for generating revenue.
Coffee is traditionally
brewed slowly on
charcoal stoves.
Source: Central Statistical Agency of Ethiopia
Abonesh Tesema at her
home in Repi mixing
cement.
Abonesh Tesema jabs her spade into a
mound of volcanic ash in her yard and
scoops some onto a metal grill. Picking
up the grill, she sifts the gritty red ash,
then carries a bucketful of it into her
shed where she sets about mixing it
with cement powder and water.
Next, Abonesh coaxes the cement mixture into a metal mould and pounds
it into place with a wooden rod before
gently lowering the smooth cement
piece onto a shelf to dry.
It is a familiar routine for the entrepreneur who, for the past four years, has
been manufacturing Mirt cookstoves,
a popular brand of domestic stove in
Ethiopia that burns wood and dung
more efficiently than traditional open
stoves and emits less smoke. The stove
is specifically designed for baking
injera, a spongy flatbread that is a staple food in Ethiopia.
The Mirt stove is distinctive not just
because of its solid construction and
efficient design. It features a small door
through which fuelwood is inserted and
a chimney that channels smoke to one
side, reducing eye irritation for cooks
and greatly reducing indoor air pollution. Injera is baked in large rounds
like giant pancakes on the stove’s clay
cooking plate, which has a 60 centimetre diameter, the perfect measurement
for cooking injera.
Abonesh lives in Repi, a town near the
outskirts of Ethiopia’s capital city of
Addis Ababa. In her shed, she manufactures the six interlocking cement
pieces that form a Mirt stove. She
buys the clay plates and cane lids
separately. Abonesh sells the basic set
of six pieces for ETB 120 (US$6) and
charges her customers—mostly her
neighbours—ETB 240 (US$12) for a
complete stove, including plate and lid.
“It’s a good business because I can
produce around five stoves in a day by
working for four or five hours but I don’t
have to work every day and that suits
me,” Abonesh says. “The life of the
stove is one or two years, or even longer,
depending how well it’s kept and how
often it gets used. I have many, many
customers who have come back to me
for more than one stove.”
Abonesh is one of half a dozen women
in her town who was trained to manufacture, sell and install Mirt stoves
through a project run by the German
Agency for Technical Cooperation
(GIZ) in conjunction with the Government of Ethiopia. The project
also helps participants to set up their
business, and hundreds of budding
entrepreneurs like her across the country are benefitting from the training and
support.
The history of the Mirt stove dates back
to the early 1990’s, recalls Melessaw
Shanko, the director of MEGEN Power,
an Ethiopian energy consultancy.
“We had a household energy crisis,”
Melessaw explains. “We were so
dependent on trees for fuelwood but
we had predictions that by the year
2000 there would be no trees left in
Ethiopia. Everybody was scared.”
It quickly became apparent that with
40 to 50 percent of household fuel
going to baking injera, any solution
must include an efficient way to cook
Ethiopia’s staple food.
So the improved injera Mirt cookstove
was developed by the then Ethiopian
Energy Authority. The World Bank provided funding for its design and testing.
Support for the production, marketing
and distribution of Mirt stoves has since
continued under various project titles,
MAY 2015
with the involvement of a number of
Ethiopian government ministries, regional
bureaus and energy agencies. Different
donors have provided financing, including the United Kingdom Department for
International Development, Shell Foundation, the Ministry of Foreign Affairs of
the Netherlands and GIZ.
by better protection from stove heat,
reduced smoke, speed of cooking and
better quality injera.
Years of intense marketing and
awareness-raising campaigns by the
Government and GIZ have resulted in
widespread use of the stove, especially
in urban markets.
the number of stoves they are able to
produce.
However, a number of challenges
remain. For example, despite being
a two-decade-old industry, most Mirt
stove businesses are informal and
based on family labour. Very few producers have evolved from home-based
The Mirt stove is distinctive not just because of its solid construction and efficient
design. It features a small door through which fuelwood is inserted and a chimney
that channels smoke to one side, reducing eye irritation for cooks and greatly
reducing indoor air pollution.
The Government’s strong involvement
led to the creation of Ethiopia’s National
Improved Cookstoves Programme,
which today is managed by the Ministry
of Water, Irrigation and Energy.
One household using a Mirt stove for
injera baking saves around 500 kilograms of fuelwood annually, potentially
saving the equivalent of four trees over
the life of the stove. The stoves are also
saving families time and money. For
example, rural households typically
spend an average of six hours a week
collecting fuelwood just to bake their
injera in the traditional way over a fire.
Training local entrepreneurs to set up
Mirt-related businesses has become a
hallmark of the Mirt model. The project’s focus has been on four regions:
Amhara, Oromia, Tigray and Southern
Nations, Nationalities and Peoples. The
Meanwhile, Mirt stove manufacturers
stove has been popular with consumare earning annual incomes ranging
ers who have rated fuel economy as
between US$100 (ETB 2,000) and
their top reason for purchase, followed
US$795 (ETB 16,000), depending on
MAY 2015
small businesses into large-scale
manufacturers.
Mesfin Belay Dagnachew leads a communal Mirt stove workshop in Sebata,
a town in the Oromia region. Mesfin
spearheaded the Mirt stove movement
in Sebata and its surrounding areas
after being trained by GIZ nine years
ago. He went on to train other men and
women who now work with him in the
workshop.
Currently, 10 Mirt artisans use the
communal shed and their salaries are
paid by the local community. Each
producer keeps a small share of the
profits while the remainder goes into
a central fund that is used to buy raw
materials.
For some Mirt producers, the stoves
are their only source of income, while
it provides a supplementary income for
others like Abonesh, whose husband
works, and for Mesfin himself, who
has his own shop. While Abonesh,
Mesfin and his colleagues run viable
businesses, they are acutely aware
of growing market pressures. The
availability and price of raw materials
in often in flux, leading to lower profit
margins for producers and an overall
lack of widespread uptake by potential
consumers. The stove’s bulkiness is
also a turn-off, requiring on-site installation and limiting off-the-shelf sales
and easy distribution to other neighbouring areas of Ethiopia.
Abonesh and Mesfin have also noticed
a drop in demand, with more of their
neighbours switching to electric stoves
as the reach of the country’s electricity
grid has expanded in recent years.
In fact, Abonesh is the only remaining
stove producer from her original group
Abonesh Tesema at her
home in Repi building a
Mirt stove.
Etagegne Agiza,
Debiritu Ferega and
Asnakeeh Bireda at the
Mirt stoves workshop in
Sebeta, Ethiopia.
of trainees. The fact she is the sole
Mirt stove supplier in her area has ultimately helped her business, she says.
Although she has electricity connected
to her home, Abonesh prefers to bake
injera on her Mirt stove.
“The power supply is unreliable. Some
people get up at 3 a.m. to bake injera
hoping there will be enough power
because after three days if you don’t
bake, you must throw out the mixture.
But you can use a wood-powered stove
anytime,” Abonesh explains. Injera is
made from a mixture of ground teff (a
nutritious grain) and water and must
ferment for around three days before
baking can begin.
In addition to government resources,
the Ethiopian stove sector receives significant support from donors and NGOs
that provide training in cookstove construction, business development and
finding start-up capital. While initial
subsidies helped to boost sales, they
did not lead to sustainable market
growth and were dropped.
we use brochures provided by GIZ,”
Mesfin says. “There’s a huge need for
working capital for producers in order
to overcome some of the existing barriers and get the balance right.”
Melessaw believes as many as
three-quarters of Mirt stove producers may have quit their businesses
following a drop in demand but says
potential energy consumption by Ethiopian households and the practice of
“fuel-stacking”—in which consumers
depend on multiple sources of energy,
such as keeping a wood stove to back
up an electric stove in case of power
loss—means there is still significant
promise for the improved biomass
stove market.
Mesfin is optimistic as well.
“My vision is to set up a big Mirt stoves
industry. I believe there is still very
good potential for this here. Even if I
die tomorrow, my children can continue this business,” he predicts.
“We need to advertise but we can’t
afford it so we promote our stoves at
markets and religious gatherings, and
MAY 2015
countryprofile
nepal
pay-as-you-go financing
Bringing the Pay-As-You-Go Model to Solar Energy Customers
In the past decade, dozens of companies have developed high quality,
solar-powered solutions to meet the
needs of the energy poor, many of them
off-grid consumers living in rural and
remote areas of developing countries.
Affordability remains a significant barrier
to mass adoption, however. For most
people living off-grid, lack of access to
financing options—loans, leasing, payment mechanisms and so on—makes it
nearly impossible to adopt modern solar
solutions since they cannot afford to buy
them with cash only.
Currently, the pay-as-you-go model is
proving to be most successful when
used for the sale of solar products,
including solar lanterns, small solar systems and large solar home systems that
can cost as much as US$1,000. Already,
25 companies are actively using the
pay-as-you-go model to sell solar energy
to people living in sub-Saharan Africa,
Asia and Latin America. At least 150,000
solar products have been sold this way
since 2011, and an additional 100,000
customers will have accessed solar
energy through pay-as-you-go financing
by the end of 2014. By 2019 an estiA number of startup energy companies,
mated three million pay-as-you-go solar
however, are adapting pay-as-you-go digsystems will have been sold.
ital technology in the developing world to
make modern energy accessible to the
In the past five years, a number of conrural poor. These consumers often spend verging trends have made it possible to
money on inefficient energy sources like bring pay-as-you-go pricing and financing
kerosene through small, user-defined
to the small-scale solar energy market:
payments—in other words, when they
• The cost of solar panels, batteries
have the cash in hand or funds loaded
and light-emitting diodes (LEDs) has
on a mobile wallet. Pay-as-you-go pricdropped significantly in the past five
ing allows customers to flexibly pay for
years, and research indicates these
clean, modern energy sources in a simtrends will continue. Solar panels
ilar way using prepaid mobile airtime,
today are about half the price they
with the potential to expand access to
were in 2008 and are expected to
safe, cheap renewable energy sources
dip to less than US$1 per watt in the
to millions of people living without
next two years.
electricity.
MAY 2015
• The small-scale solar product
market has experienced dramatic
growth in terms of units sold and
new businesses and users in the
past five years. In Africa alone, 5.8
million solar lighting products were
sold between 2009 and 2014 with
an annual sales growth of almost
100 percent per year.
• Significant advances have been
made in the past decade to improve
the reliability and life of solar products, making them more attractive
to customers. For example, average
battery life has increased by over 20
percent in the past four years, and
high-quality solar products often
boast a useful life of over three
years with minimal maintenance.
Several leading manufacturers
now offer a three-year standard
full warranty covering full product
replacement.
• The rapid adoption of mobile
phones and network coverage
across most off-grid areas makes it
easy to communicate with customers. In Africa, the number of off-grid
mobile subscribers is expected to
reach 400 million by 2015.
Julie
Marksof/ Mobisol
UNCDF
Courtesy
Digital pay-as-you-go financing is transforming the way people pay for energy
A Mobisol employee
makes a marketing
presentation at Kikatiti
Maasai Market,
Tanzania.
While the business model and customer
offerings can vary widely among companies, the pay-as-you-go approach
does share a few common elements.
For example, consumers are required to
make a small deposit or down payment,
typically 10 to 30 percent of the full
cost, to receive the solar product or to
have it installed. In addition, they must
prepay for the ability to use the solar
product via mobile money or through
a mobile-based energy credit model.
Payment enforcement technology within
the product denies energy service if the
customer’s prepaid balance has been
used or expires, enabling access again
when the customer adds prepaid credit
to their account.
Beyond that, companies use a variety of
payment and service delivery models,
often determined by whether or not their
client base live in places with reliable
cellular coverage or use established
mobile money payment systems. For
example, pay-as-you-go energy companies in East Africa such as M-KOPA
and Mobisol use existing mobile phone
money transfer platforms to receive payments, update customer accounts and
deliver proof of payment data directly to
the solar product via the cellular data
network. If customers have access to
mobile phone services but not mobile
money systems, or else have no cellular coverage at all, companies will sell
energy credits—for example scratch-off
cards—through an authorized agent,
who usually work by commission and
are found at stores, supermarkets, cafes
and mobile phone shops.
Several companies such as Angaza
Design and divi Power are making it
easier for first-time users who live off
both the electrical and cellular grids to
purchase and use simple, portable solar
lights that retail for as low as US$8.
Customers bring their solar light to an
appointed agent, pay in cash, and the
agent unlocks the device using a smartphone provided by the energy company
or distributor. Agents can also do this by
going door-to-door. While there are some
drawbacks, such a business and technology model allows companies to offer
people affordable solar power without
adding significant hardware expenses to
already low-cost products.
snapshot
Already, 25 companies are actively
using the pay-as-you-go model to sell
solar energy to people living in subSaharan Africa, Asia and Latin America.
At least 150,000 solar products
have been sold this way since 2011,
and an additional 100,000
customers will have accessed solar
energy through pay-as-you-go financing
by the end of 2014.
In some pay-as-you-go models, the
customer can ultimately own the energy
asset through a rent-to-own program,
often providing the client a credit history for the first time in their life. Other
MAY 2015
MAY 2015
Going forward, a key challenge to
expanding the pay-as-you-go model for
solar power equipment is the need to
build strong distribution networks that
bring payment and products straight
to the customer’s doorstep. Given the
logistical challenges of reaching deep
into rural areas, companies often establish partnerships with for-profit—such
as mobile network operators and their
extensive network of agents—and nonprofit organizations to help with sales
and product distribution.
To truly expand across the developing
world in the same way that mobile phone
access has, the pay-as-you-go solar sector will need significant capital to both
support new business development and
initial market experience, and to improve
existing models. The fact that half of the
Top right: Mobisol
Adademie trainees
install a solar home
system in Nyamata,
Rwanda.
Julie Marks / UNCDF
Mobisol’s technician
discusses the angle
of the sun with his
customer in Nyamata,
Rwanda.
Bottom right: A new
Mobisol customer in
Nyamata, Rwanda,
shows off his solar
home system.
US$69 million early stage investments in
off-grid solar companies went to two payas-you-go companies has shown that
investors see this as a highly viable and
even profitable business. This trend will
enable the rural poor to access clean,
cheap solar energy in a way that fits their
budgets and lives.
This article has been adapted from the
Consultative Group to Assist the Poor’s
2014 report Access to Energy via Digital
Finance: Overview of Models and Prospects
for Innovation. (http://www.cgap.org/
publications/access-energy-digital-financemodels-innovation)
Courtesy of Mobisol
Other options for pay-as-you-go models include determining payments
based on time such as number of days
or weeks, or by the amount of actual
electricity usage, such as number of
watt or kilowatt hours. Specific financing terms—such as down payment
amounts—also vary by company and are
often determined by the size and type
of solar product. Regardless of these
options, the most common selling point
for customers of pay-as-you-go solar
energy companies is to deliver energy
at a price that is competitive with other
affordable, but inefficient and dirty alternatives like kerosene.
Courtesy of Mobisol
Courtesy of Mobisol
companies, specifically ones in Ghana,
Tanzania and Zimbabwe, deliver prepaid
energy as an ongoing service, making
the energy company responsible for the
cost and ongoing maintenance of solar
equipment. Companies can avoid the
extra overhead costs of determining the
payment risk of their customers who,
in turn, do not have to worry about the
upkeep and cost of their equipment.
This model is particularly useful for companies hoping to quickly develop a large
subscriber base that includes a mix of
high-end and low-end users.
MAY 2015
countryprofile
nepal
partnership
Courtesy of PAMIGA
Schneider Electric and PAMIGA join forces to make solar energy accessible through microfinance
The first group of
Schneider’s Energy
Entrepreneurs to finish
training in September
2014 will oversee
customer service in
Cameroon’s rural
villages.
Making Solar Energy Accessible Through Microfinance
How can a multinational company and
a non-profit organization combine their
skills to improve access to energy for the
poor?
Schneider Electric is a French company
specializing in electrical distribution
and the world’s largest manufacturer of
low- and medium-voltage equipment;
PAMIGA is an international NGO providing technical assistance to 16 rural
microfinance institutions in sub-Saharan Africa. The two organizations are
working together to address the issue of
energy poverty, each bringing its unique
expertise and resources to the table.
In March 2013 they launched the
Energy and Microfinance Programme
in three pilot countries, including Cameroon, Ethiopia and Tanzania, with
plans to expand into Burkina Faso,
Kenya, Senegal and Togo by 2016. Their
objective is to help rural households,
micro- and small enterprises and entire
communities to purchase and use
solar powered energy sources through
microfinance. The Programme’s solar
product offerings include solar lanterns,
solar home systems and solar stations
for lighting, mobile phone charging and
other electrical devices, as well as solar
MAY 2015
water pumps for irrigation.
We sat down with both organizations to
get a clearer understanding about what
motivated them to create this partnership, and about their respective roles,
achievements and the key lessons they
have learned.
to ensure a high quality and sustainable
programme, we needed to find a strong
energy partner, like Schneider Electric.
Schneider Electric: Since 2008, Schneider
Electric has been involved in increasing
access to energy for the poor in developing countries through its Business,
Innovation and People at the Base of
Why have you decided to be part of such the Pyramid initiative, which we coma partnership?
monly refer to as BipBop. We use three
complementary approaches. First, we
PAMIGA: As a result of regular field visits
provide financing for the development
and market studies that we did with our
of local companies that supply energy
partner microfinance institutions, we
solutions to remote areas; secondly,
identified a clear demand by clients for
we create solar products and business
solar powered energy products. Rural
models that address the energy needs
microfinance clients are poor and have
of rural households and businesses; and
very limited access to energy. They
lastly we provide training to local people
use traditional sources of energy that
to help them become electricians or
are costly, unhealthy and hinder their
solar product retailers and technicians,
economic development. Our member
with over 50,000 people trained so far.
microfinance institutions are aware of
these needs and believe they can play
Helping the rural poor access affordable
a role in helping these clients’ access
sources of energy through microfinance
to solar powered energy. However, they
appears to be one of the most promisalso realize that the quality of solar prod- ing business models in which we are
ucts and aftersales services varies a lot
currently investing our efforts. Following
from one provider to another. Thus, they the BipBop model, we can minimize
asked for our support in exploring this
two of the main obstacles that other
new market. To limit credit risk for our
actors seeking to provide energy access
member microfinance institutions and
may face in this market: reaching out
to the target populations and overcoming the financial barriers to purchasing
and maintaining solar powered energy
solutions. This is why we were willing to
engage in a partnership with a microfinance network like PAMIGA.
What is your role within the Energy and
Microfinance Programme?
SE: Thanks to our six years of experience
in the access-to-energy market, we are
able to provide solar energy solutions
that specifically address our client
population’s needs; we also provide a
commitment to quality, a warranty and
after-sales services. Within the BipBop
programme we are also building up our
local network of solar product distributors. Moreover, we provide technical
training to the staff of participating
microfinance institutions and local
distributors so they understand our products better. Finally, we are also in charge
of developing a network of local technicians, called “Energy Entrepreneurs” or
“Village Electricians,” who are located
close to the rural populations they serve
and who are responsible for the installation and maintenance of solar solutions.
P: Our role in the Programme is to
provide technical assistance to our
member microfinance institutions,
including assessing the energy and
financial needs of their clients, designing
customized financial products, adapting internal processes to support the
management of the energy portfolio and
developing awareness and marketing
tools. We are also in charge of evaluating
the market testing results of the new
financial products and designing a plan
for a full-scale launch of the programme
once the pilot phase is finished.
snapshot
Photovoltaic capacity worldwide is
increasing. For 2018, worldwide photovoltaic capacity is projected to double
or even triple from current levels.
By 2050, solar power is expected to
become the world’s largest source
of electricity, with solar photovoltaics
and solar thermal respectively accounting for 16 and 11 percent of total
electricity produced by solar power.
Additionally, PAMIGA acts as a facilitator between participating microfinance
institutions and energy companies and
coordinates the Programme and all of its
on-the-ground activities. Furthermore,
PAMIGA is setting up an investment
vehicle, PAMIGA Finance, dedicated to
financing the energy portfolios of partner microfinance institutions. As they
develop a track record in financing clean
energy, the idea is to attract additional
capital from banks and investors when it
comes time to offer the loan products on
a much larger scale.
What has been achieved so far?
P: So far, the Programme has been
MAY 2015
partnership role distribution
effort needed to raise clients’ awareness about solar energy—including its
benefits and limitations—should not
be underestimated. Communication is
crucial for good up-take and proper use
of solar solutions. This is why we are
currently developing networks of local
technicians who are based in the villages we are trying to reach to promote
solar solutions and provide after-sales
services.
= Schneider Electric
S
P
=P
AMIGA
= Rural households, microand small enterprises
1
Technical
Training
Center
6
3
Local
Distributors
Partner
Microfinance
Institutions
Partner
Microfinance
Institutions
Local
Distributors
Village
Electricians
4
Partner
Microfinance
Institutions
7
5
2
1
onduct joint marketing actions to
C
promote solar solutions and financial
products
launched in three countries—Cameroon, Ethiopia and Tanzania—with seven
microfinance institutions now offering
financial products such as microloans
and savings accounts that are designed
to help poor clients purchase solar products such as lanterns and solar home
systems. All the participating microfinance institutions have been trained on
solar technology and now feel confident
in promoting the new products and
answering clients’ questions.
SE: Since 2013, we have marketed our
solar products to over 3,010 clients
in Cameroon, Ethiopia and Tanzania
through technology demonstrations
and promotional activities. As of the
end of 2014, 644 rural clients in these
countries have been able to invest in a
solar kit for lighting and mobile phone
charging through microfinance loans.
MAY 2015
2
Apply for loan
5
Pay back their loans
3
O
nce loan is validated, pays for
the solar solutions on behalf of the
clients
6
T
rain young people to become solar
energy technicians
4
7
D
elivers the solar solutions with user
guide and provides warranty
P
rovide installation and aftersales
services
This is only the beginning, as we aim to
reach at least 50,000 rural households,
350 rural enterprises and 175 villages
in a total of five countries in the region,
including Burkina Faso and Senegal, by
the end of 2016.
What lessons have you already learned
from this partnership?
P: First, we realized that people living
in rural areas want solar solutions that
are not only affordable, but also reliable,
and that include accessible after-sales
services. Thus it was critical that we
work only with partners who offer quality products. The pilot programme also
showed that training the staff of partner
microfinance institutions on solar energy
is key to build a sense of ownership and
to make sure that accurate and helpful
messages about solar power and energy
access are communicated to potential
clients.
Finally, our experience has shown that
building a trusted relationship between
microfinance and energy companies
is essential but remains a challenge.
Both parties need to learn how to work
together and understand each other’s
priorities, constraints and ways of working. It may take time but is crucial for
the sustainability of such partnerships.
SE: The Programme showed us that in
addition to household needs, micro- and
small enterprises in rural areas could
also greatly benefit from access to solar
solutions. Based on feedback from the
field, we have developed a new solar
home system called the Homaya MS
specifically tailored to the needs of
micro- and small enterprises.
The Programme also showed that the
SE: After evaluating the pilot phase, we
will roll out the full programme in the
first three countries and replicate it in
additional countries, including Burkina
Faso, Kenya, Senegal and Togo.
P: In addition to solar solutions for rural
households and rural micro- and small
enterprises, we will start reaching out to
villages to promote community solar stations that could supply energy to public
buildings like schools, health centers
and village offices as well as to small
businesses. Given the public nature
of this investment, with Schneider’s
assistance we will test a public-private
partnership approach that combines
microcredit and public funds in order to
finance such community solar stations.
Courtesy of PAMIGA
1
Courtesy of PAMIGA
What are the next steps?
Top: Children in this
Oromia region village
can now study in the
evening thanks to solar
lighting.
In October 2014, PAMIGA published a
case study of its experience in Cameroon, as well as a methodological toolkit
to guide practitioners in microfinance
and energy on how to develop financial
products for small-scale energy products
for households and micro-enterprises.
The case study is available on the
Microfinance Gateway: http://www.
microfinancegateway.org/library/
energy-and-microfinance-cases-a3c-anduccgn-cameroon
Bottom: A villager
in Ethiopia’s Oromia
Region positions a solar
panel from her new
solar kit onto the roof
of her house.
MAY 2015
CleanStart’s approach to country-level engagement
CleanStart has different ways of approaching country-level engagement. This mainly depends on the maturity
level of the energy and microfinance markets.
nepal
senegal
ethiopia
burkina faso
cambodia
uganda
cameroon
tanzania
The boundaries and names shown and the designations used on this map do not imply official endorsement or acceptance by the United Nations. Dotted line represents approximately the Line of Control in Jammu and Kashmir agreed upon
by India and Pakistan. The final status of Jammu and Kashmir has not yet been agreed upon by the parties. Appears without prejudice to the question of sovereignty.
Sector-wide approach
CleanStart is working to build a strong
energy finance market for the poor
on a national level. The programme
does this by supporting financing
for both consumers and energy
enterprises while partnering closely
with government agencies aiming to
expand energy access. CleanStart also
connects on-the-ground knowledge
and experience to national policy, and
thus contributes to national visions of
achieving sustainable energy for all.
ethiopia, Nepal, Uganda
MAY 2015
business model incubation
CleanStart supports energy business
models with the potential to expand
nationally. It provides initial capital in
the form of grants or loan guarantees
that enable energy businesses access
larger sources of capital from local
markets. CleanStart also helps
financial service providers to test new
ways of financing.
Cambodia, Tanzania
strategic partnerships
Expanding the energy finance market
is a huge undertaking that cannot be
achieved alone. Partnerships allow
CleanStart to expand its programming
in the countries where it works, learn
about new markets and adopt new
tools.
Cameroon, Burkina Faso, Ethiopia,
Senegal, Tanzania (PAMIGA partners)
Download a copy of CleanStart Connections or read online at www.uncdf.org/en/cleanstart
Share your stories and aspirations in achieving energy for all @uncdfcleanstart

CleanStart Connections

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