Educating Lenders on Financing Small-Scale Solar: India

Overview

Loans for small-scale renewables in India, and other emerging economies, are often inaccessible to local business owners because banks are uncomfortable funding what they regard as ‘unfamiliar’ technologies. Banks can also resist lending to small businesses of any kind given the informal nature of much of India’s economy, where more than 80% of people work in the informal sector, making bank loans exceedingly inaccessible because of high fees. The growth in alternative financing options, such as micro-finance loans, is helping to improve accessibility, but many institutions still lack familiarity with clean energy specifically.

Micro-financing institutions help bridge the loan gap by providing affordable loans to low-income communities. Training and upskilling both businesses and financial institutions help support the development of a domestic financing ecosystem for small-scale renewable energy adoption, and thus increase renewable capacity.

Impact

The Bharatiya Vikas Trust approaches this problem on both fronts: educating businesses in rural areas on how to deploy renewable energy technologies and teaching financial institutions how to use microfinance to support clean energy ventures. The Trust specifically trains bankers, micro-finance institutions, and government departments on financing small-scale solar projects.

One example of an activity supported by the Bharatiya Vikas Trust, is Revathi Naik who’s sewing company uses on-site solar. Naik received a training from the Bharatiya Vikas Trust centered around encouraging entrepreneurship for women. The training included information such as loan acquisition, which led Naik to seek a loan from the bank in 2014 and set up four sewing machines powered by solar energy.

Source: BloombergNEF, Saravan & Dash, 2017. Note: Self-Help Groups are groups of rural women who pull their resources together in order to provide micro-loans.

Opportunity

Educating a full range of institutions can be particularly useful in developing countries as often smaller institutions such as micro-finance organizations rely directly on regional, rural banks for support. Those institutions, in turn, can rely on even larger, either national or multinational sources of funding. So upskilling institutions all along the financial value chain can bring significant benefits.

Similar programs can be implemented in other emerging markets where knowledge around renewable energy markets is lacking. Nigeria has already implemented a project in partnership with the World Bank Electrification Project, educating Nigerian bankers on finance models for the off-grid solar sector. Such initiatives can be highly impactful at the local level, particularly in markets where local populations require micro-finance.

Source

BloombergNEF and Bloomberg Philanthropies report: Scaling-Up Renewable Energy in Africa

Learn more about BloombergNEF solutions, Bloomberg Philanthropies, Scaling-Up Renewable Energy in Africa report or find out how to become a BloombergNEF client.