SELCO recently held a two-day workshop on “Access to Sustainable Energy Services via Innovative Financing” in collaboration with Bharatiya Vikas Trust and Syndicate Institute of Bank Management at Manipal, Karnataka. This workshop was a platform to disseminate learnings from a series of 10 projects that were implemented under a partnership with SELCO and Vienna based Renewable Energy and Energy Efficiency Partnership (REEEP) www.reeep.org/ from 2007-2009.
Present were eminent personalities including Mr.D.T.Pai, Former Chairman, Syndicate Bank; Dr. N.K.Thingalaya, Former Chairman of Syndicate Bank; Mr. Pramod, GM, Syndicate Bank; Mr.Srihari Bhat, GM, Syndicate Bank; and Mr. K.M. Udupa, Managing Trustee BVT. Over 50 representatives from NABARD, RBI, Syndicate Bank, Canara Bank, Vijaya bank, Karnataka Vikas Grameen Bank and other Regional Rural Banks, Greenpeace and other NGOs also attended the workshop.
SELCO India began as an experiment in the very early 90’s with the mission to provide sustainable energy services to underserved communities through a combination of door step service and door step financing. Even after 14 years of SELCO’s endeavour in bridging the gap for several poor communities to access certain energy services like solar lighting by “piggy backing” on third parties to finance their needs but, it still continues to be an experiment. Today SELCO’s reach has extended to over 100,000 households. Even today, though SELCO has the expertise to come up with any need based technology solution for any segment - financial barrier hinders its delivery to the people who need it the most. The importance for appropriate financing to promote solar lighting systems and other energy services became very clear in the early days of SELCO, which led to lot of investment of time, money and resources in convincing financial institutions about the same.
SELCO’s major presence is in Karnataka which is a hub of financial activity perhaps, as it is the birthplace of five of India’s largest banks: Syndicate Bank, Karnataka Bank, Corporation Bank, Canara Bank and Vijaya Bank. However, despite the existence of these institutions the hesitation to finance solar energy products continues as:
- Margin money or down payment of 15-25%, is required as per the Reserve Bank of India (RBI) regulations to disburse a loan. Unfortunately, for many poor families, even 15% many a time is too high to pay and hence they cannot avail the loan and fall into the “unaffordable category”.
- Having proper land documents and assets as collateral is not mandatory in practical lending conditions for loans below Rs.25, 000 as per the Reserve Bank of India regulations. However, financial institutions are hesitant to take on the risk of lending to end users without collateral as non-repayment could severely affect their loan portfolio and professional track record. A third party partially covering the risk would persuade them to lend. Though the underserved communities are willing to pay the installments, their application for a loan normally gets rejected due to their inability to satisfactorily meet this pre-requisite.
- Even if the financial institutions are flexible to customize a loan product for renewable energy services, the roadblock is the relative high interest rates.
- In India, several communities do not have access to modern energy services and infrastructure due to their remote locations making it difficult for the service provider to run a profitable business due to the high transaction cost. The associated financial institutions also incur high expenses for the same and would be hesitant to raise their interest rates in some cases.
REEEP’s support was a huge impetus for SELCO to break many of the above mentioned barriers and paved the way for it to prove that if financed appropriately, and designed based on needs, the poor can and will pay for services. REEEP’s support enabled SELCO to create and experiment with financial models.
SELCO published a booklet (http://selco-india.com/pdfs/selco_booklet_web.pdf) which highlights 7 case studies which stand testimony to the fact that capital subsidy on renewable energy products, such as solar, is not always the answer. End users can afford solar despite its perceived initial high costs, as channels were created to facilitate affordable financing and not subsidize the product. The government could step in and re-allocate these subsidies to financial institutions to facilitate financing to the poorer sections of the society.
Saturday, March 28, 2009
Monday, January 19, 2009
Welcome to SELCO INDIA!
In SELCO we believe that poverty is the greatest threat to the environment. The poor use some of the most inefficient and polluting types of fuel. They do that not because it is cheap but, because they do not have a choice.
In 2009, India is supposed to be growing at a rate between 7-9% however, 650 million of its citizens still do not have access to reliable electricity and many more millions do not have access to cleaner forms of cooking.
Most of the population seem to be insulated from the growth that the government and many of the corporates are celebrating! The classic line taken by corporates is that the growth will have a trickle down affect. Well, let us not fool ourselves with percentages, growth patterns, demographics and so on. From our own experience in the field – we can boldly say that the trickle down effects have been more on the negative side than positive. The growth has led to increased migration from the rural to urban, drastic growth of slums in urban areas, unimaginable pressure on limited resources like water and other basic amenities: well we can keep going. What we need to ask ourselves is who is responsible? – All of us are!
Today we are hiding behind programs like CSR activities, Green initiatives, Volunteering etc. These are not solutions that will make a big difference. They will not lead to any concrete solutions to the complex problems that make up the whole issue of poverty.
We all need to act fast – not in coming up with solutions – but with putting in processes to apprehend the problems and bring out the appropriate solutions. There is absolutely no quick-fix solution to poverty – we are not selling soap or shampoo packets here. We are trying to come up with solutions that will address the basic needs of the poor and not the ‘wants’. The wants have been conveniently disguised as needs by the corporates that are making a mockery of the sector called as ‘rural markets’. Most of the supply chains created to ‘capture’ the rural markets have been one-sided. Not only are the solutions ‘rich’ centric but we also expect the poor to buy the goods that the rich produce and we hardly reverse the supply chain in a way that the poor can have access to the ‘rich’ markets.
For a sustainable solution to alleviate poverty – many of the processes need to be reversed. Solutions have to come from the stakeholders (the poor) themselves. – but they need to be provided with appropriate infrastructure, tools, access to finance and so on.
We, in SELCO, believe that sustainable energies like solar energy can lay the foundation for creating the appropriate platform for the poor to come out of poverty. Decentralized technologies using sustainable energies cement the missing links in many parts of the chain – a chain that will lead them to a better quality of life in a more holistic way. SELCO INDIA has provided reliable services to more than 100,000 households and for many we been partners with to take the 1st step away from poverty.
We will express our views on a variety of subjects through this blog and welcome your thoughts and opinions to engage ourselves in an open discussion on how we can move closer to, if not finding solutions, at least asking ourselves the right questions that will point us in a direction to alleviate poverty.
In SELCO we believe that poverty is the greatest threat to the environment. The poor use some of the most inefficient and polluting types of fuel. They do that not because it is cheap but, because they do not have a choice.
In 2009, India is supposed to be growing at a rate between 7-9% however, 650 million of its citizens still do not have access to reliable electricity and many more millions do not have access to cleaner forms of cooking.
Most of the population seem to be insulated from the growth that the government and many of the corporates are celebrating! The classic line taken by corporates is that the growth will have a trickle down affect. Well, let us not fool ourselves with percentages, growth patterns, demographics and so on. From our own experience in the field – we can boldly say that the trickle down effects have been more on the negative side than positive. The growth has led to increased migration from the rural to urban, drastic growth of slums in urban areas, unimaginable pressure on limited resources like water and other basic amenities: well we can keep going. What we need to ask ourselves is who is responsible? – All of us are!
Today we are hiding behind programs like CSR activities, Green initiatives, Volunteering etc. These are not solutions that will make a big difference. They will not lead to any concrete solutions to the complex problems that make up the whole issue of poverty.
We all need to act fast – not in coming up with solutions – but with putting in processes to apprehend the problems and bring out the appropriate solutions. There is absolutely no quick-fix solution to poverty – we are not selling soap or shampoo packets here. We are trying to come up with solutions that will address the basic needs of the poor and not the ‘wants’. The wants have been conveniently disguised as needs by the corporates that are making a mockery of the sector called as ‘rural markets’. Most of the supply chains created to ‘capture’ the rural markets have been one-sided. Not only are the solutions ‘rich’ centric but we also expect the poor to buy the goods that the rich produce and we hardly reverse the supply chain in a way that the poor can have access to the ‘rich’ markets.
For a sustainable solution to alleviate poverty – many of the processes need to be reversed. Solutions have to come from the stakeholders (the poor) themselves. – but they need to be provided with appropriate infrastructure, tools, access to finance and so on.
We, in SELCO, believe that sustainable energies like solar energy can lay the foundation for creating the appropriate platform for the poor to come out of poverty. Decentralized technologies using sustainable energies cement the missing links in many parts of the chain – a chain that will lead them to a better quality of life in a more holistic way. SELCO INDIA has provided reliable services to more than 100,000 households and for many we been partners with to take the 1st step away from poverty.
We will express our views on a variety of subjects through this blog and welcome your thoughts and opinions to engage ourselves in an open discussion on how we can move closer to, if not finding solutions, at least asking ourselves the right questions that will point us in a direction to alleviate poverty.
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