Intelligent Energy – Europe (IEE) COOPENER Acronym .Intelligent Energy – Europe (IEE) COOPENER

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szaGrant agreement No. EIE/06/248/SI2.448127

Intelligent Energy Europe (IEE) COOPENER

Acronym RENDEV

Title Reinforcing provision of sustainable ENergy services in Bangladesh and Indonesia for Poverty alleviation and sustainable DEVelopment

D11 Toolkits for Microfinance Institutions

Final version

WP4: Enabling cross-sectoral linkages in the use of renewable for micro-enterprise development

Date of submission

April 2009

Organization and responsible of the deliverable:

PlaNet Finance / Philippe GAENG

Date of start of the project:

01 / 01 / 2007

Duration:

36 months

Organization and responsible of the deliverable:

PlaNet Finance / Pascale Geslain

www.rendev.org

D11 Toolkits for Microfinance Institutions Final version Authors

Pascale GESLAIN (PlaNet Finance, France) Philippe GAENG (PlaNet Finance, France)

With the collaboration of : Hasna Kahn, Prokaushali Sangsad Ltd, Bangladesh Yani WitjYBUL, Indonesia Novrida ,YBUL, Indonesia

X PU Public

PP Restricted to all participants of the project (including EU Services)

RE Restricted to a special group of participants of the project (including EU services)

CO Confidential, only for members of the consortium (including services of EU)

Disclaimer: The project "Reinforcing provision of sustainable ENergy services in Bangladesh and Indonesia for Poverty alleviation and sustainable DEVelopment (RENDEV) is supported by the European Commission through the EIE programme (Grant agreement no. EIE/06/248). The sole responsibility for the content of this report lies with the authors. It does not represent the opinion of the European Communities. The European Commission is not responsible for any use that may be made of the information contained therein.

www.rendev.org

RRRReinforcing provision of sustainable ENENENENergy services in Bangladesh and Indonesia for Poverty alleviation and sustainable DEVDEVDEVDEVelopment

D11 Toolkits for Microfinance Institutions

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The RENDEV project The RENDEV project aims to explore ways to link microfinance and access to

renewable energy, bringing a positive contribution in rural development and poverty

alleviation in Bangladesh and Indonesia by increasing access to solar energy, the

development of micro enterprise, and the provision of microfinance mechanisms

tailored for low income peoples needs.

The project started in January 2007 and will last until December 2009. RENDEV is

financed by the European Commission under its Intelligent Energy line.

The main objectives of the RENDEV project are:

To promote development of income generating activities with renewable

energy supply;

To identify measures justifying involvement of Small and Medium Sized

Enterprises in the solar energy sector;

To build synergies between the microfinance sector, the renewable energy

sector and the micro enterprises in Bangladesh and Indonesia;

To better inform stakeholders providing pro-poor sustainable renewable

energy services;

To bring a positive impact on the quality of life in rural districts.

RRRReinforcing provision of sustainable ENENENENergy services in Bangladesh and Indonesia for Poverty alleviation and sustainable DEVDEVDEVDEVelopment

D11 Toolkits for Microfinance Institutions

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Table of contents

The RENDEV project....................................................................................................i Table of contents ......................................................................................................... ii List of Abbreviations ................................................................................................... iv List of Tables ...............................................................................................................v List of Figures ..............................................................................................................v List of Boxes ...............................................................................................................vi I. Introduction.......................................................................................................... 1

I.1. Why microfinance and renewable energies?................................................ 1 I.1.1. Renewable energies or how to solve energy issues at the local level... 1 I.1.2. The main barrier to renewable energies: investment cost ..................... 1 I.1.3. The main solution: credit ....................................................................... 2

I.2. Fields of application...................................................................................... 3 I.2.1. Solar Home Systems ............................................................................ 3 I.2.2. Solar driers............................................................................................ 6 I.2.3. Solar pumping ....................................................................................... 8 I.2.4. Improved cooking stove ...................................................................... 11 I.2.5. Biogas Plant ........................................................................................ 13 I.2.6. Micro hydro ......................................................................................... 15

II. How to link MFI activities with renewable energies ........................................... 18 II.1. Opportunities.............................................................................................. 18

II.1.1. Renewable energies are a solvable product ....................................... 18 II.1.2. Contribute to the social mission of the MFI ......................................... 19 II.1.3. Diversification of the range of product in a context of competition ...... 19 II.1.4. Additional benefit : enlarge MFIs customer base with wealthy customers.......................................................................................................... 20

II.2. Barriers....................................................................................................... 20 II.2.1. High operation cost ............................................................................. 20 II.2.2. Scarcity of clients ................................................................................ 21 II.2.3. Important needs of seeding funds ....................................................... 22 II.2.4. Managing the new risks in the portfolio ............................................... 23 II.2.5. Developing a new product consumes a lot of resources ..................... 24 II.2.6. Develop a suitable partnership with energy specialists ....................... 24

Main Barriers to PV Market Development in Indonesia......................................... 25 II.3. Two-hands approach: the MFI develops partnership with RE companies and provide financing to RE clients.............................................................................. 26

II.3.1. Theoretical model................................................................................ 26 II.3.2. Example: BRI and Mambruk in Indonesia ........................................... 26 II.3.3. Pro ...................................................................................................... 27 II.3.4. Cons.................................................................................................... 28

II.4. One-hand approach: the MFI develops a dedicated unit financing and installing RE systems............................................................................................ 30

II.4.1. Theoretical model................................................................................ 30 II.4.2. Example: Grameen Shakti of Bangladesh .......................................... 31 II.4.3. Pro ...................................................................................................... 32 II.4.4. Cons.................................................................................................... 33

RRRReinforcing provision of sustainable ENENENENergy services in Bangladesh and Indonesia for Poverty alleviation and sustainable DEVDEVDEVDEVelopment

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II.5. Microentrepreneurs approach: the MFI lends money to microentrepreneurs who runs a renewable energy business................................................................ 34

II.5.1. Theoretical model................................................................................ 34 II.5.2. Example: Grameen Shakti micro utility ............................................... 34 II.5.3. Pro ...................................................................................................... 36 II.5.4. Cons.................................................................................................... 36

III. Guideline for Solar Home Systems (SHS) ..................................................... 38 III.1. Technology................................................................................................. 38

III.1.1. Basic requirement ............................................................................... 39 III.1.2. How to select a good product.............................................................. 39

III.2. Costs ...........................................................................