FIELD Report 9: Microfinance and Energy Poverty

This FIELD Report, written by ACCION International, summarizes the results of the Energy Links Project, a three-year pilot by the Center for Financial Inclusion at ACCION International, financed by USAID’s Microenterprise Development Office (through the FIELD-Support LWA, which is managed by FHI 360) and the Wallace Global Fund.

Energy Links’ aim was to determine how the established microfinance sector in African countries can address energy poverty by increasing access to small-scale clean energy solutions at the household level. The goals of this initiative were:
• to improve access to renewable energy for underserved populations;
• to focus on the household level to address lighting and cooking needs; and
• to promote a financially sustainable approach through innovative financing mechanisms to establish and grow the micro-energy sector.

The Energy Links project began in late 2007 to investigate whether a broker between microfinance providers, clean energy providers and distributors, and people needing financial services could accelerate the access of rural households to modern energy. Energy Links initially looked at traditional MFIs as the most likely financial partner but soon realized that to reach massive scale among the off-grid population, the project should also look beyond them to organizations with a deeper presence in rural areas, and less overlap with those who are already connected to the electricity grid. This led to partnerships with NGOs promoting savings groups.

However, the needs for clean energy are vast, involve many kinds of products and finance, and cannot be addressed by any single institutional type. As Energy Links continued, it pursued parallel initiatives, with some efforts focusing exclusively on MFIs and others exclusively on savings groups. Both of these complementary efforts are discussed in this report. Energy Links also found that in order to go beyond successful independent experiences with microenergy, a sector-wide approach can be successful at building a critical mass of institutional capacity, and putting the sector on the path to long-term viability. Through Energy Links, a great deal was learned about energy use at the base of the pyramid, and ways to alleviate energy poverty. This report summarizes the key lessons.