Micro-financing of renewable energy systems

Maike Bunse and Prof. Dr. Holger Wallbaum, triple innova, Germany
Carmen Dienst, Wuppertal Institute for Climate, Environment, Energy, Germany

Keywords

microfinance, renewable energy, local action, energy services, productive energy use, poverty reduction

Abstract

While improved energy services have many quality of life benefits like lighting or television, the productive use of electricity can also help to reduce poverty, leading to increased profitability and productivity for micro, small and medium enterprises, and small industries. The remoteness of rural locations usually makes it difficult to expand electricity supply through a centralised grid system. Therefore people living in off-grid regions often rely on expensive fossil fuels like diesel and kerosene. People in remote areas often do not have the financial background to afford the initial costs for renewable energy applications. Micro-financing of renewable energy systems is a possible answer to provide financial services and support productive activities in a sustainable manner for low-income people. There are various types of microfinance institutions (MFIs), ranging from local cooperatives, NGOs, credit unions, private commercial banks and non-bank financial institutions as well as parts of state-owned banks.

To underline the benefits of micro financing renewable energy systems, good practice projects of local microfinance activities are presented. These projects have been identified in the course of WISIONS, an initiative of the Wuppertal Institute for Climate, Environment and Energy with support of ProEvolution, a Swiss-based foundation.

The two different approaches of the project support on one side the realisation of new project ideas (SEPS – Sustainable Energy Project Support) and on the other spread successful examples (PREP – Promotion of Resource Efficiency Projects). Through the PREP field of action, good practices in energy and resource efficiency are spread worldwide through the Internet and brochures. In the 5th PREP-brochure of WISIONS on “Microfinance and Renewable Energy” five good-practice examples are shown that link this promising financing system with modern and sustainable renewable energy technologies.