MICROFINANCE FOR CLEAN

ENERGY : TECHNICAL

ASSISTANCE PACKAGE

PRESENTER: MANAB CHAKRABORTY

PROJECT NAME: PACED-D, USAID

Process Followed In

Developing TA Package

• Extensive background

research

• Interactions with MFIs,

ESCOs, Banks,

Donors

• Advise from Industry

experts

Key drivers in the Energy

Access Space

Over 30% of the population doesn’t have access to electricity

• Grid supply - where available - is highly fragile

• Several government schemes to encourage the uptake of off-

grid renewables, but progress is slow

• Key policy in recent times – the National Solar Mission II

Start ups have stepped in to fill this gap

• Nascent sector, but fast growing

• Innovative business models for delivery but inadequate support

on the financial, policy and technology front

• Huge challenge in scale-up/replication for widespread impact

Example: Grameen Shakti,

Bangladesh

GS is close to reaching 10 MN customers and sale of 900,000

energy products.

GS uses local community members to market its products, such as

teachers and elected leaders.

The elements of its’ strategy are:

• Soft credit through installments which makes solar home systems

affordable

• Advocacy and promotion among rural communities

• Community involvement and social acceptance

• Effective after sales service

• Extensive retail network

Solar PV Lighting/Electrification

Lighting

Products

Home Lighting

Systems

Mini grids

Lighting

Mini grids

(Electrification)

Configuration LED/CFL

Lanterns (1-5

W)

• 10-100 W

DC

• < 1 kw/AC

200 W DC:

connected to

40 h/h within

100 m radius

Kw scale

DC/AC:

connected to

50-400 h/h

Service Lighting +

mobile recharge

Lighting +

mobile

recharge +

entertainment

Lighting +

mobile

recharge

Lighting +

mobile

recharge+

Entertainment+

income

generation

Price Rs. 830-4,100 8,300-41,000 1.25 lacs -2.1

lacs

33 lacs – 12.5

MN

Solar PV Lighting/Electrification

Lighting

Products

Home

Lighting

Systems

Mini grids

Lighting

Mini grids

(Electrification)

Bus. model Cash sales;

MFI loans

Asset

financing thru

banks

Fee for

service model

Stage of

growth

Growth Growth boost

from the NSM

Nascent Nascent

Market

drivers

Non subsidy

market

Partial

subsidy (40%

on benchmark

cost (Rs.

333/Wp)

Subsidy & non

subsidy

models

Require

significant

subsidy

Rural Energy Market Structure

Technological barriers

• Lack of standardization/quality

assurance

• Lack of adequate

R&D/innovation

• New and untapped markets

Market Barriers

• High upfront cost

• Low awareness among

consumers, financiers etc.

• Lack of adequate last mile

services

Equipment suppliers –PV

Panels, Batteries etc.

System Integrators/Micro utility operators

End Users

Policy/Regulatory Barriers

• Many

policies/regulations/administrativ

e responsibilities

• Issues in policy implementation

A1: The value chain for meeting the needs of off-grid customers is

disjointed, hence bringing together MFIs, energy companies, banks,

micro-grid operators, and technical service providers would create

new synergies, and opportunities for mutual cooperation.

A2: Debt funds will flow if professionally managed MFIs and energy

companies are able to present their business case properly to

financial institutions.

A3: There are sufficient number of MFIs in target states willing to

venture into energy financing at the last mile with support from

PACE-D under MSP.

PACE-D wishes to only provide TA in kind and does not intend

to provide any cash in the form of grant, debt, or equity.

What we have understood

Areas of Intervention and Focus

AREA OF

INTERVENETION

1. Enlarging of

microfinancing of

last mile sales of

RE products

2. Decentralized

rural

electrification

3. RE policy and RE

promotion at state

level

4. Policy dialogue at

national level

1. Replicable

Business

Models

2. Enabling

Environment,

Scaling-up

1. Improved

Conditions for

Renewable

Energy in Off-

Grid Areas

2. Market creation

for RE products

and services

MAIN FOCUS OBJECTIVE

TA Implementation Arrangement

1. Stakeholder

Consultation

Present TA Package, get feedback

2. Finalize Elements

of TA Package

Submit Suggestions and criteria for MF

selection

3. Organize one to

one interactions

SIDBI, NABARD, Micro grid operators,

MFIN, Sa-Dhan, Donors, individual MFIs,

RE suppliers

4. Solicit Proposals Through word of mouth and formal

invitation.

5. Award and

Implementation

Begin by June 2014 over 2 year period

Components of TA Package

1. Goals and objectives of TA Enlarge micro financing of last

mile sales of energy products

2. Anticipated outcomes of TA Increase in energy portfolio of

MFIs and ESCOS

3. TA services, activities,

providers

TAC1: Financing Retail Chain

Energy Products and Services

TAC2:Financing micro grids

based clean energy services

TAC3: Recommendations for Off

Grid Policy and Institutional

Reforms

TAC1: Financing Retail Clean

Energy Products and Services 1/2

• Target group: MFIs, Bank and Bulk Lenders for RE

• Expected Output: More capacity to expand RE business

• Activities:

– Shortlist 3-5 MFI partners for the preparation of the

detailed technical action plans and its impementation

– Establish partnership with 2-3 RE service

providers/suppliers

– Institutional capacity building of of MFIs and ESCOS

TAC1: Financing Retail ..2/2

• Prepare a business plan for accelerating clean energy

deployment (Elements: business model, market channel

development, outreach programs, training of MFI staff,

mentoring new entrepreneurs etc.)

• Building institutional capacity

- Training of staff and intermediaries

- Helping setting of standards and after sales services

- Communication and outreach programs

- Kits specially designed to meet the needs of the target

areas

- Facilitating linkages with technology product, suppliers,

banks and other FIs

TAC2: Financing micro grids

based clean energy services 1/2

Target: MFIs, Banks, Bulk Lenders, Micro grid product and

service providers and entrepreneurs

Activities:

• Identify and short list 3-5 micro grid service/product

providers

• Prepare business plans for

• Implementation of technical assistance package

(training of staff, standards for product and after sales

service, communication and outreach programs)

• Facilitating linkages with technology/product suppliers,

banks and other financial institutions

TAC2: Financing Micro grids ..2/2

• Prepare a business plan for accelerating clean energy

deployment (Elements: business model, market channel

development, outreach programs, training of staff, mentoring

new entrepreneurs etc.)

• Building institutional capacity

- Training of staff and intermediaries

- Helping setting of standards and after sales services

- Communication and outreach programs

- A microfinance for micro grids kit

- Facilitating linkages with technology product, suppliers,

banks and other FIs

TAC3: Off Grid Policy

and Institutional Reforms

Target group: Regulators, MNRE, UP and Bihar RE

Departments, Opinion Makers Training of energy sector

professionals

Activities:

• Preparation of a report highlighting experiences related to

new implementation models and impacts of end users

• Best practices manual for energy lending via microfinance

• Preparation of a paper for inputs for policy on

microfinance for clean energy deployment for addressing

energy poverty

• Organization of 2 multi-stakeholder consultation in

December 2015 and July 2016 to discuss experiences,

best practices and policy inputs.

Generic Activities Under TA

All activities fall invariably in one or more of the following axis:

• Facilitation of linkages with financial institutions, investors,

technology providers, technical experts etc.

• HR development (training, workshops, exposure tours etc.)

• Knowledge dissemination and training activities viz.

workshops, websites, publications etc.

• Feasibility studies to determine expansion of business in off-

grid geographical areas

• Document Preparation (Business Plan, Application for

debt/equity, contracts, bidding documents, etc.)

• Project Viability Studies (technical, economic, financial,

environmental, social, institutional and/or legal)

• Policy Advocacy work

Hypothetical Example : Solar PV

Irrigation Pumps

Awareness Raising• Documentation of

business

models/lessons

• Dissemination

workshops

• Engagement with

policy makers

Innovative Business Model

• Help with business planning

• Facilitating financing and

marketing

• Access to convergent

technologies

• Individual/marginal farmer

ownership

Capacity Building• Bank manager training

on technology/viability

• Developing appropriate

financial products

• Training of local

entrepreneurs/technicia

ns

Operational strength

• Strong track record in sector (50,000+ MF borrowers, portfolio of Rs.

10+ cr, PAR -30 days below <5%)

• The Company has experienced project development team

• Top management commitment to new energy/ expanding energy lending

documented in annual report, vision statement etc.

Financing

• Lending relationship with more than two banks

• Financial strength: profitable for the last two years

• Financing structure aligned with investment needs/ project outlook

Technology

• Tie up with two energy suppliers

• Providing innovative solutions that improve the quality of products

TA Relevance

• Demand for off-grid energy product and services in operation area

• Existing operational focus/ intention to operate in energy lending in

target States (Bihar, UP, Odisha, MP)

MFI Partner Selection Criteria

Operational strength

• Strong track record in sector (min 300 clients, one year in operation)

• The Company has experienced project development team

• Documented top management commitment to the project as reflected in

document

Financing

• Lending relationship with more than two banks

• Financial strength: profitable for the last two years

• Financing structure aligned with investment needs/ project outlook

Technology

• Tie up with equipment suppliers with tested technology and/or after

sales service

• Providing innovative solutions that improve the quality of products

TA Relevance

• Demand for off-grid energy product and services

• Existing operational focus/ intention to operate in energy lending in

target States (Bihar, UP, Odisha, MP)

Micro Grid Partner

Selection Criteria

MFI Partner Selection Criteria

Thank You

Process of Retail Market Development

5 Steps to empower a new

distribution channel

• Identify natural partners

• Develop their role in the

process

• Set clear expectations

• Develop and deliver training

• Create an after sales support

system