Field excerpts from door-step financing

The pulse of SELCO is its dedicated field staff that is closely linked with local partners and customers. Our field experiences have encountered several barriers of which financial ones are the biggest. SELCO took the opportunity to tap into the well established local rural financial networks and establishing strong relationships with local bank staff at a very personal level. However there are numerous roadblocks and listed below are field excerpts from 15 years of experience of working with financial institutions to finance solar systems.

· Relationship between the poor and banks: In rural areas there is a hesitation to venture into the banks because of cumbersome paperwork. Documentation is crucial for banks but the numerous processes deters the poor. Distances, bad roads and poor public transportation also prevent frequent visits to banks leading people to save in their homes thereby increasing the likelihood of instant expenditure.

· Exclusive Solar Portfolio: Since there isn’t an exclusive loan portfolio for solar systems, sometimes the financial institutions do not prioritize existing money towards sustainable energy. Preference goes towards agriculture which has clear cut deliverables for the managers. Hence renewable energy products, although income generating, are not deemed as priority for disbursing loans. More so funds are not pumped into these banks thus lowering priority of allocating money towards these requests.

· Small quantum loans: Many believe that solar products are highly expensive and hence affordability for the customers is low. On the contrary since the quantum of the loan is small in comparison to other loan portfolios bank staff are dissuaded from encouraging solar loans as the transaction costs are higher than the loan itself.

· Staff: The most important component of a partnership is the people representing both parties. There are very few visionary bank managers who encourage its customers to avail solar loans despite the high cost and lack of an exclusive fund. There is also a shortage of staff who can execute these transactions efficiently as limited resources are allocated to more lucrative portfolios.

· Poor infrastructure: Remote locations of banks and poor availability of appropriate technology (within banks and during field visits) increases frustration levels of bank staff which leads them to not focus too much time on low income needs especially since the latter is time consuming.

Despite some these barriers, SELCO has established sustainable long standing relationships with banks by working in tandem with the staff like assistance in identifying and subsequently educating customers of solar loan terms, persistence through routine visits in convincing banks to finance systems, conducting demonstrations and awareness programs as the technical partner thereby allowing the bank to focus on financing, offering innovative financing models keeping in mind the current loan portfolios, and tapping into SHGs and other similar groups or individuals to create access channels for customers in remote areas among others.

In 1996, SELCO was able to convince the Malabhraba Grameena Bank, a subsidiary of the state-owned Syndicate Bank, to offer India’s first solar consumer-loan program. Initially, SELCO began providing PV systems for the Bank’s over 200 branch offices. SELCO then arranged for the training of bank employees regarding SELCO’s products, and soon the financing by bank branches of PV systems for rural households commenced. Today SELCO shares a solar loan portfolio with all the

• · major public sector banks in Karnataka-Syndicate Bank, Canara Bank, State Bank of Mysore, Corporation Bank
• · Regional rural banks like Karnataka Vikas Grameen Bank, Cauvery Kalpathiru Grameen Bank, Pragathi Grameen Bank and so on
• · The largest women's cooperative bank in India, SEWA Bank

SELCO regularly organizes regional workshops with financial institutions and most recently through the REEEP workshop in Manipal (refer blog dated March 28, 2009). SELCO is persistent in discussions on a policy level with RBI representatives and regional head offices of its financial partners to encourage dialogues on improving the financial access to sustainable energy services for the underserved.