Category 18 April 2019

Microfinance for Solar Home Systems

The Bangladesh Solar Homes Programme aimed to expand energy access in the country, in line with the UN’s Millennium Development Goals. The country has a great number of homes which are not connected to the grid, and decentralised energy solutions were seen as a good way to electrify rural areas. The programme was providing demand subsidies and concessional microloans, making solar energy installations affordable for households. As a result of the programme, Bangladesh has the fastest growing off-grid solar PV home system program in the world.

The challenge:

Bangladesh has undergone rapid economic development in recent years, however, 43% of the country’s population live below the poverty line, and 58% of the population has no access to electricity from the national grid. Bangladesh identified the expansion of energy access as a key task in achieving its Millennium Development Goals, and has set itself a target of universal access to electricity by 2021. Due to budget and energy supply limitations, decentralised solutions were required.

The measure:

In 2003, the Bangladesh Solar Homes Programme was launched, driven by NGOs such as Grameen Shakti (a non-profit village renewables scheme linked to the micro-credit lender Grameen bank), with substantial report from the Bangladesh Infrastructure Development Company (IDCOL).

The programme provided subsidies and concessional loans through micro-finance institutions for supporting private demand for the installation of PV systems. These systems are small – between 20 and 120 watt peak capacity – but also relatively inexpensive, and the electricity they provide can be transformative in providing electrical lighting and thus extending working and educational time.

The Programme initially intended to install 50,000 systems over five years, but was quickly installing this number per month. By 2014, over three million systems had been installed, increasing per capita income by 9-12% and per capita expenditure by 4-5%. Over 160,000 metric tonnes of CO2 emissions have been saved as a result of reduced use of kerosene lamps. Additionally, over 17,000 technicians have been trained for construction, installation and maintenance of Solar Home Systems.

Lessons learnt:

The scheme started at a small scale, and was then scaled up with support from the national government, building upon the success of existing networks of micro-credit institutions. In order to build confidence in the scheme, responsibilities have been assigned for micro-credit payments, after-sales services and warranties, clearly sharing risks between consumers and dealers. The programme has put considerable efforts into building local networks for raising consumer awareness and disseminating information, as well as developing technical capacity.

Further deployment:

The programme is transferable, but relies on the presence of micro-credit organisations. The practice would be highly relevant for countries where rural communities remain unconnected to the grid, and is estimated as GML 8.