MICROCAPITAL.ORG STORY: SEWA, SKS Microfinance and The Aryavart Gramin Bank Provide Alternative Power to the Rural Poor

A number of Indian MFI’s now provide loans for cost effective alternative power to people who have little or no access to electricity. With heavy reliance on kerosene and firewood, millions of homes have little or no light after dark. And the time spent collecting firewood or waiting in line to purchase kerosene leaves little time for income generating activities. This makes it difficult for many of the rural and urban poor to elevate themselves out of poverty.

According to the Renewable Energy & Energy Efficiency Partnership (REEEP), there are 76 million homes without electricity in India while 65 million rely on kerosene.

“Providing electricity is a government responsibility, but it’s a gigantic task and the government alone cannot do it,” said Shirish Garud, coordinator of REEEP in south Asia. [2]

The United Nations Environment Program’s (UNEP) study entitled “Global Trends in Sustainable Energy Investment 2009” showed that renewable energy investment in India grew by 12 percent (USD 3.7 billion) in 2008. The Indian government plans to grow the sector to USD 19 billion by 2012. Data on the amount contributed by MFI’s was not available. [3]

In 2006, Self Employed Women’s Association (SEWA) [4], partnered with India’s Solar Electric Light Company (SELCO) to create Project Urja in order to provide alternative power to the poor. The project was the result of a study commissioned by the United Nations Office for Project Services to SEWA and Mahila Housing SEWA Trust (MHT). The mission was to develop a microfinance strategy for consumer lending in the energy sector.

The study determined that, on average, households spent 3 to 4 hours per day and USD 8 either collecting or buying firewood. It concluded that the time and money spent on unreliable energy sources would be better spent on income generating activities. And as large numbers of women work from their homes, reliable power is essential to their livelihood. [5]

The loans allow women to purchase solar lanterns and smokeless gas stoves for cooking. Additionally, they are used to light up vegetable stands and tea stalls. [6] SEWA has already provided more than 6 million rupees (USD 124,000) in loans for solar appliances to approximately 10 percent of their 300,000 members.

SEWA was founded in 1972 as an organization of poor, self employed women. SEWA also launched a bank that lends to women and provides financial management. As of March 2008, the SEWA Bank had 300,000 savers, 22,000 borrowers and USD 25 million in total assets. Eighty percent of SEWA’s account holders reside in urban areas, while 20 percent reside in rural areas. For more information on SEWA, please see MICROCAPITAL.ORG’s Who’s Who in Microfinance article [7].

The Aryavart Gramin Bank has also expanded into renewable energy. It has already approved loans for 8,000 solar home systems in Uttar Pradesh, India’s most populated region and a key farming region.

Established in 2006, The Aryavart Gramin Bank, has 305 branches, six regional offices and a head office. The Bank operates in 6 districts namely Lucknow, Barabanki, Farrukhabad, Hardoi, Kannauj and Unnao in the state of Uttar Pradesh. As of 2008, it held USD 469 million in customer deposits.

And SKS Microfinance, India’s largest MFI, offers solar lamps to its 5 million customers. [8] Founded in 2006, SKS has loaned over USD 170,000 to approximately 600,000 women in India. It currently has 1200 branches in 15 states throughout India.

Traditionally, MFI’s have focused mainly on financial services. However, as Elizabeth Israel, a manager at Green Microfinance, a US for profit LLC that assists environmental and microfinance sectors, stated, “in the last few years, we have seen a tremendous influx of interest.” [9]

Bibliography

[1] http://www.indiamicrofinance.com/micro-finance/renewable-microfinancing

[2] http://tvnz.co.nz/technology-news/solar-power-lighting-rural-india-30957…

[3] http://switchboard.nrdc.org/blogs/sreddy/india_12_growth_in_renewable_e….

[4] https://www.microcapital.org/who’s-who-in-microfinance-ela-ramesh-bhatt/

[5] http://www.sewabank.com/energy-services-portfolio.htm

[6] http://ipsnews.net/news.asp?idnews=42725

[7] https://www.microcapital.org/who’s-who-in-microfinance-ela-ramesh-bhatt/

[8]http://www.khaleejtimes.com/DisplayarticleNew.asp?section=todaysfeatures&xfile=data/todaysfeatures/2009/October/todaysfeatures_October66.xml

[9] http://www.indiamicrofinance.com/microfinance/india-microfinance/renewab…

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