Only 5% of green energy projects can be financed with the current international funds available, but the World Bank believes microfinance could be the answer to this growing problem. The Climate Investment Funds (CIF), established by the Bank in collaboration with regional multilateral development banks, has funded projects in 15 African countries. However, the African Development Bank director for energy, environment and climate change development Hela Cheikhrouhou said that few people in rural areas have been able to benefit from the fund as a result of administrative barriers.
"We need to make sure that funds can be accessed by rural populations because there is an urgency in making climate change projects happen on the ground," said Victor Kabengele, project coordinator at the ministry of environment of the Democratic Republic of Congo (DRC).
However, microfinance projects can help such as the Global Partnership on Output-Based Aid (GPOBA) that started among six agencies that include the Australian government’s aid agency AusAID, the World Bank and its International Finance Corporation, the Swedish government’s development agency SIDA, Britain’s Department for International Development, and the Netherlands’ Directorate-General of Development Cooperation.
Backing private financiers in rural areas have helped communities purchase household renewable energy technologies. The organization has helped to kick start 131 output-based aid projects with $3.5 billion in World Bank funding and $2.8 billion from various governments with almost a third of the amount raised going to Africa.
Meanwhile Dutch NGO Rural Energy Foundation (REF) and Global Village Energy Partnership (GVEP) have joined together to pilot a new microfinancing credit model that will have REF creating a hire purchase company that will sell solar home systems in rural Africa.
The selection process was held in Uganda from May to December 2010 which has 30 selected retailers on board for the piloted scheme. The system’s total price, including installation and servicing, is around £600 with the hire purchase facility. A deposit of £140 is paid upfront – followed by 12 monthly installments of £40. Retailer Willem Nolens said the hire purchase pilot has enabled a large number of people to power their homes and shops for the first time. “The hire purchase facility allows the client to rent the system for a pre-determined period of time; after which ownership is transferred once REF’s costs have been recovered.”
Taking advantage of the scheme, Basil Okera purchased equipment from Moses to get his barbershop and phone charging business off the ground. “I’m going to make a down payment of 25% now; then another in three months’ time and the remaining I will pay it within the year.”
According to James Wakaba, Regional Manager at GVEP, “The pilot hire-purchase scheme was so successful that it has completely changed REF’s whole business model. The next obvious step for them was to set up a hire purchase company which operate alongside their dealer network making loans credit available to their customers who will then be serviced by their local networks of dealers.”
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