Loans fund renewables for poor

WASHINGTON -- Solar and wind power are being worked into rural areas of developing countries as financiers back residents on clean energy installations.

In areas with sparse populations and poverty-level incomes, electricity is not easy to come by. For more than a decade, institutions have used the micro-loan as an alternative to donations. A bank or other institution will offer an individual, usually a matriarch, or a small business a small loan to give them the opportunity to work themselves out of debt and out of poverty.

The loans provide people in developing nations with a means to bypass government or other inefficiencies, said Howard Brady, solutions manager at Unitus. In Bangladesh, for example, he said, only 2 percent of the population had access to phones, but a micro-loan to install a cell tower allowed many people access.

Another issue that inhibits large-scale electrification is that funding is often unavailable for large projects such as nuclear or biomass plants or transmission lines to connect rural areas to the electric grid. It's not economically feasible, he said, when the population is two people per square mile.

There are a growing number of institutions worldwide providing micro-loans to homes and villages to provide electricity. According to U.N. reports, the Development Bank of Uganda is providing rural micro-loans for energy with support from the Shell Foundation.

Grameen Bank in Bangladesh also provides energy micro-financing, with more than 100,000 photovoltaic systems and several wind and biogas projects.

In Bhutan, the Solar Electric Light Fund provided micro-loans to families in the Phobjikha Valley to purchase solar home systems. The four or six-light BP Solar panel systems cost between $365 and $475; the monthly repayment with interest is about what families would spend on kerosene, candles and batteries.

Farmers have been using wind for many years in connection with water pumps and irrigation. A recent project of the U.S. Department of Energy's National Renewable Energy Laboratory provides assistance to Brazil in installing wind-diesel hybrid systems with battery backups.

Distributed Energy Systems in Vermont recently developed a new version of one of its wind turbines geared especially toward powering small villages through hybrid systems.

Unitus, a firm that provides banks with assistance in providing micro-loans, has one partner, FIS Empresa Social, that finances solar systems in Argentina, Brady said.

The micro-credit program began in 2005 in Boqueros, where residents had no electricity. FIS began financing solar systems for single-family homes by purchasing solar panels wholesale and selling them to residents through 24-month loans. There are about 300 panels installed so far, with batteries that, when fully charged during the day, can provide about three or four hours of light at night. The interest rate is 60 percent per year.

"It's not high when the next best thing is from a loan shark who charges you 10 times more than that; it becomes a real saving," Brady said.

Micro-loans are paid back a lot more readily than U.S. consumers pay back their credit-card payments. The rate of loan loss in the United States is about 6 percent, which is between four and five times higher than loan loss on micro-loans. The loss rate is 1 percent per year or less. One bank that loaned about $10 million in Mexico only had to write off about $30,000.

"There's a myth that's out there that says that the poor can't pay back their loans or that there's no incentive for them to pay back their loans, but really we see that the poor do pay back their loans at an amazingly high rate," Brady said.

By: UPI Energy

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