Project Stakeholders
The project planning phase explored the issues related to various
stakeholders, including target customers, vendors and financial
institutions. This included answering the following questions:
- Is restricted access to rural credit a significant reason
for the slow growth of the market for SHS, specially the lower
end systems meant for lighting purposes (solar lighting products)?
- If so, what are the solutions to encouraging banks
in the region to commence loan programs?
| Vendor and bank discussions during stakeholder
consultations sought feedback on various possible finance
support mechanisms, including Front-end or Back-end Interest
Rate Subsidies, Credit Default Guarantees, Loan Term Extensions,
Beneficiary Margin Support, and Subsidised Transaction costs.
An interest subsidy - the structure for which is currently
under finalisation in consultation with the proposed bank
partners - was selected based on the feedback received. |
The main findings from stakeholder discussions were as follows:
- Maximum demand for Solar Home Systems is in areas with non-existent
or erratic electricity grid
- Benchmarking of energy costs is often done against equivalent
costs for running generators and inverters rather than conventional
grid power. However, power tariffs are going up, making alternative
energy sources more attractive
- Apart from addressing basic needs of lighting, the strongest
motivators for use of SHS are children's education and TV
- One of the most important barriers to increased use of solar
home systems has been the lack of available credit for financing
purchases:
- Banks have not been forthcoming either because bank managers
are not sensitized to the feasibility of solar home systems
or the vendors have been unable to forge working relationships
with these financial institutions.
-
The banking system is well financed presently, and banks
are seeking new loan products into which to channel their
Resources, although they are not yet ready to treat SHS
as a standard product.
-
Transaction costs are relatively high for small loans
for SHS, reducing the attractiveness for the banks. This
is mainly due to the small number of systems currently
financed and a lack of familiarity of the technology amongst
bank managers.
-
Although some banks have given loans for SHS on a very
small scale, they do not have any formal loan programs
for buying SHS. They are however receptive to the idea
to experiment and then scale up lending on a larger scale.
-
Group lending through Self-Help Groups ("SHGs")
could help reach out to poorer households. Lending to
SHGs has been a good experience and hence many banks now
prefer to go through them; this also helps reduce transaction
costs.
According to both vendors and banks, an interest rate subsidy
could help address many of these barriers and in so doing wouldaccelerate
SHS adoption by providing bank loan managers an incentive to promote
the product and consumers attractive terms to purchase the product.
Implementation of such a scheme will require close consultation
with the various stakeholders viz., partner banks, vendors, and
experts. Governmental organisations (Ministry of Non-Conventional
Energy sources and their local affiliates) must be kept informed,
and NABARD and Reserve Bank of India will need to be consulted
for regulatory measures, as required. Active participation of
some NGOs and customers involved in promotion and use of SHS will
also be explored.
| The project has been designed through ongoing
stakeholder interaction during project preparation. Their
input has been used in finalising the various components of
the project including the form of the interest subsidy, the
awareness raising programmes, vendor qualification process,
etc. This consultative approach will continue to be used during
implementation with a view to obtaining feedback on the project
performance and suggestions for improvement. The scheme is
thus based on stakeholder needs and preferences and can be
expected to have their full commitment. |
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