FINANCING OFF-GRID SOLUTIONS FOR THE POOR: A Success Story About Overcoming Obstacles

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Shri Moon Kalita lives with his wife and two children in a small settlement close to the banks of the Brahmaputra River in upper Assam. Depending heavily on costly kerosene for lighting in the evening, he has been considering for quite some time to buy a small solar home system which would make him and his family more independent when it comes to electricity supply. However, the upfront costs for the system were far too high and although he works as a labourer on one of the tea plantations he did not have the cash at hand to invest in such a system. He talked to banks to get a loan but to his utter surprise the loan amount he asked for was too little and the banks refused point blank to give him the money.

In a decentralized or stand-alone mode, renewable energy is an appropriate, scalable, and viable solution for providing electricity to power-deficient villages and hamlets. Moreover, the energy demand of the last-mile households in rural areas is still an underexplored opportunity. There are many challenges in meeting this demand. The scenario described above shows exemplarily one of the major ones. The loans many households in India require for relatively small investments in renewable energy technologies do not justify the transaction costs for the banks to process the loan application. Even the thresholds of micro-finance institutions are often too high. This is where the Indo-German Energy Programme IGENACCESS of GIZ intended to undertake a pilot project. The Indo-German Energy Programme – Access to Energy in Rural Areas (IGEN-ACCESS) seeks to create a conducive environment for rural renewable energy enterprises in order to make energy services easily accessible to the rural population. Its aim was to create an effective, scalable ecosystem of product–market–finance by establishing a robust business and distribution model and fostering entrepreneurship. IGENACCESS is a bilateral cooperation project carried out by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) and the Ministry of New and Renewable Energy (MNRE), Government of India. Off-grid renewable energy products were comparatively new to the customers. This lack of knowledge was coupled with an underdeveloped market due to missing distribution and service channels for sale, marketing, and after-sale services of solar products and systems, and the absence of an ecosystem for energy financing. During the course of the pilot the market mainly evolved over access to finance, capacity building for the end consumer, an anchoring body to provide sales and post-sales services, and the appropriate technology. The identified states for developing the business model were Assam, Bihar, Jharkhand, Chhattisgarh, and Odisha.


In the pilot, a social enterprise was in charge of client awareness generation, product promotion, sales and distribution, servicing, and market development. The social enterprise acted as a facilitator of the product, aggregated demand, and guaranteed the quality and safety of the product. Also, additional service features, such as after-sales service and a two years product warranty, protected consumer interests. There are several companies in the market that manufacture and supply solar lighting and other solar products, such as water pumps, fans, etc. The social enterprise undertook a due diligence process to identify the right technology partner. Since the start of the pilot, a microfinance institution has provided financial assistance to households which were already its customers. A non-governmental organization (NGO) supported and incubated the social enterprise by way of providing knowledge and capacity development, facilitated the interactions between the stakeholders, supported the monitoring and evaluation of the pilot and the subsequent sharing of gained experiences.


The social enterprise has built on the trust established by the microfinance institution over several years with the households to introduce the unfamiliar concept of solar energy to potential clients. The microfinance institution has reached out to villages and households through the so-called doorstep banking service operators. Weekly meetings of the operators with microfinance customers at the village level have been used for product demonstration to end-customers. Through this interaction, the clients understood that the products were simple to install and operate. They were taught that the quality and the reliability of the products were ensured through the microfinance institutions’ due diligence process. They learned about the two-year warranty for the products and about the post-warranty service provided by the manufacturer. Interested clients were informed that, if eligible, they could avail financing support from the microfinance institution and were taught about the documentation process for getting a loan. At the end of the product presentation, the doorstep banking service operator after gathering all relevant information on the client’s credit history, income, and character, decided on the loan application. Then, the loan documents were sent to the DSC (local branch office) for scrutiny and clearance by the ‘Credit Information Bureau of India Limited’ (CIBIL). In general, rejections so far have been very rare since the clients were already known to the banking service operators. The loans were paid back during the weekly meetings between microfinance customers and microfinance operators. This approach reduces the transaction costs for the microfinance institution and makes it financially viable for the institution to even process lower loan amounts. On the other hand, it helped the social enterprise to cut costs on setting up its own distribution channels.


The pilot started in October 2017. The progress as of January 2019 is as follows:

-650 job opportunities were created by the social enterprise under this business model. Every expansion of the intervention resulted in more employment.

-Around 200,000 households were approached.

-Around 139,502 renewable energy/ solar home lighting systems were sold through loans. As many customers bought more than one product, a total of 130,565 households or around 652,825 people, respectively, got access to energy.

-Two solar micro water pump loans were financed. There were some technical issues with the micro solar water pumps (capacity 0.1–0.5 HP). The pumps when tested in the field did not give adequate water yield. The cost of the product (up to `24,000) was also too high. Based on the yield and usage rate, the communities did not see any value in them.

-The total amount of loans disbursed under the intervention by microfinance institution was `536,428,755.

-Around 18,000 tCO2 emissions were reduced and the social enterprise received carbon credits as claimed by the social enterprise.

-The tangible results of the pilot made the management of the microfinance institution and the social enterprise aware of the potential business opportunities. Thus, without any additional support from GIZ, the microfinance institution together with the social enterprise have already extended their services to other regions in India.

-The project resulted in the development of a robust business model for the sale, distribution, financing, and servicing of renewable energy products.

-It further resulted in the availability of and accessibility to customized financial products for individual households, particularly for those at the bottom of the pyramid, to invest in renewable energy products. A sustainable model was developed that started showing self-sustainability within the project time.


The key success factors of the pilot were a shared vision, an effective close coordination at all levels, the alignment of processes of all stakeholders, reduced costs due to economy of scale, and the use of existing distribution channels.

The project has resulted in the increased use of renewable energy products, which in the long run will have a positive impact on both the environment and the climate. The social impact of the project, although not quantified yet, has witnessed multiple positive ramifications for households including higher disposable income, additional free time, better education prospects for children, increased productivity of small and marginal farmers and enterprises, and increased safety for women and children.

Mr Sashi Kumar, Technical Expert – IGEN Access project of GIZ India