About a quarter of the Indian population is bereft of any form of electricity at all. Globally, the figure stands at 1.6 billion (International Energy Association). Tragic as it may seem, not many people are aware of this fact. The role of media in highlighting the importance of such an issue is crucial and it has failed miserably in it. Our obsession with growth figures has belittled the need for achieving basic human freedoms. The growth rhetoric is not as farfetched as it may seem if it fails to provide basic necessities and entails greater inequality. Economic inequality seems to be the buzz word in contemporary development debates (especially after Thomas Piketty�s recent work* ). A less acknowledged but closely related aspect of economic inequality is energy inequality. Growing energy inequality is evident in India. The percentage of rural households relying on kerosene as the primary source of domestic lighting has increased from 55.3 percent in 2001 to 55.6 percent in 2011 whereas the corresponding figure for urban households declined substantially, from 44.3 percent in 2001 to 31.4 percent in 2011 (Census 2011).
Renewable energy is seen as a potential rescue agent to the growing energy needs of India. The Indian government through Ministry of New and Renewable Energy (MNRE) has been actively promoting renewable, energy especially solar energy through subsidies and awareness campaigns. Despite the subsidies, high upfront costs of equipment act as a major bottleneck in the widespread adoption of domestic renewable energy systems. This is where microfinance comes into picture, bridging the financial gap between rural households and renewable energy adoption. It has been acknowledged that household renewable energy systems may not be inherently income generating and returns from such systems accrue from the cost avoidance due to them (Srinivasan 2011). Thus financing such systems may not fall under the conventional microfinance paradigm. There has been some evidence of the impact of microfinance on environment (Anderson et al 2002, Lal and Israel 2006, Rouf 2012). Conventional microfinance influences environmental resources through the indirect route of social and natural capital. Green microfinance, a more targeted and direct form of microfinance is an outcome of the evolving nature and the increasing innovation experienced in the microfinance sector.
A flagship initiative of government of India is the Jawaharlal Nehru National Solar Mission (JNNSM), under which capital subsidies on solar energy are disbursed through regional rural banks (RRBs) on a pan-India level. Prathama bank, an RRB based in Uttar Pradesh is a leader in disbursing capital subsidy among other RRBs. Their micro-credit model �Prathama Jyoti Microcredit Scheme� is a remarkable success story which has enabled discretionary clean lighting for thousands of households. The most popular product offered under this is scheme is a 37Wp two Light Solar home System (SHS). The structure of this microcredit scheme is simple and innovative. The loan amount has to be repaid within 3-5 years depending on the term of loan chosen by the recipient. The minimum term of repayment is 3 years which is the lock-in period as specified by the scheme guidelines. If the recipient wishes to repay before the lock-in period, she can do so by paying almost the entire amount and leaving a token amount like Rs 500, which is subject to loan interest. The interest rate charged on the microloan is 10% per annum and there is no collateral requirement. The recipient is provided with flexibility in the schedule of repayment and they can choose to repay on a monthly basis, bi-annual or annual basis. For the monthly repayment schedule, an instalment of Rs 300 per month has to be paid (lower than their kerosene expenditure). The default rate as reported by the bank officials is less than 10 percent, which makes this scheme a highly successful one. For a given branch of the bank, approximately 8-10 villages based on the proximity to the branch are eligible for availing the microcredit. Similar schemes have been initiated by other Regional Rural Banks.
Market mechanism has to take charge in order for the concept of green microfinance to become a widespread phenomenon. Novel concepts like Crowdfunding are gaining popularity in the mainstream microfinance. Energy in Common (EIC) is one such crowdfunding organisation catering exclusively to rural renewable energy installations. However the presence of private players in this niche segment is still an exception rather than a norm. With equipment costs declining and capital subsidies expected to be phased out gradually, the future of solar micro-financing lies with the private players and socially benevolent organisations. Apart from the off-grid areas, such schemes have a great potential even in grid connected areas due to the erratic electricity supply which ranges not more than 5-7 hours in a day. MFIs can also be used as an alternate transmission route for government to channel subsidies to rural consumers. Since the monthly payment is a reasonable amount of Rs 300, conventional microloans can be clubbed with SHS provision thus creating a new category of renewable energy linked micro-loans. Solar microcredit has shown to have reduced the household dependence on kerosene as a source of lighting. Thus there is huge scope of green microfinance in India both from the supply and demand side perspective. Addressing energy poverty is closely linked with addressing income poverty. Hence the future discourse should be paved along a coherent path keeping in mind this linkage.
International Energy Agency.IEA Analysis World Energy Outlook. Paris: International Energy Agency; 2009
Chapter 5, �Cooking Fuel and Lighting� ,Census 2011
Rouf, KaziAbdur. “Green microfinance promoting green enterprise development.� International Journal of Research Studies in Management, Volume 1 Number 1(2012): 85-96
Lal, Abhishek, and Elizabeth Israel. “An overview of microfinance and the environmental sustainability of smallholder agriculture.” International journal of agricultural resources, governance and ecology 5, no. 4 (2006): 356-376.
Anderson, C. Leigh, Laura Locker, and Rachel Nugent. “Microcredit, social capital, and common pool resources.” World development 30, no. 1 (2002): 95-105
Srinivasan, Sunderan. Rational Exuberance for Renewable Energy: an economic analysis, Springer-Verlag London limited, 2011.
* Piketty, Thomas. “Capital in the twenty-first century.” Cambridge, MA, London(2014).
1 Watt Peak, a unit of power