Key Opportunities & Challenges for renewable energy deployment through Microfinance

1. 15-May-2014 Atul Mittal, d.light Energy Key Opportunities & Challenges for renewable energy deployment through Microfinance

2. Index Off-grid Scenario in India – Who is suffering? Opportunities for renewable product distribution Challenges to renewable product distribution Conclusion

3. 1.6 billion people in the world live without electricity 400 million are in India Vast majority rely on fuels that are inefficient, hazardous and generate pollution

4. How many are Poor? • Reserve Bank of India 2012 states that, 21.92% of India’s population is below the poverty line. • Bihar- 33.7% • Jharkhand- 36.8% • MP – 31.6% • Odisha – 32.5% • UP – 29% 145 million Impact: Health, Food, Education, Energy Access, living standard etc  "Number and Percentage of Population Below Poverty Line". Reserver Bank of India. 2012. Retrieved 4 April 2014.

5. How do they light their houses? • Kerosene is expensive • USD 4 billion spend • In India, households spend USD1.8 billion on kerosene and the government an additional 2.2 billion • Kerosene is polluting • 6.7 billion of liters of kerosene are used on lighting in India producing 18.1 m tons of carbon dioxide emissions Kerosene is the most commonly used fuel source for lighting by the off-grid population in India; In UP and Bihar, over 70% of households use kerosene for lighting Kerosene is dangerous • Burn risk • Explosions from adulterated kerosene • Inhalation • Ingestion causing poisoning

6. Who Suffers the most? Women

7. What is a possible solution ? Credible and Reliable Energy Appliance Supplier Microfinance Institutions representing poor women

8. What’s the Opportunity? Distribution of underserved households, 2013 • 400m off-grid (Census 2011) • 465 m people underserved (project. 2013) • 38% of the population • Can they buy? • 205m can afford a basic Solar Lantern • 50m people can afford a multi-functional Solar Lantern • 10m can afford a basic Solar Home System So what’s the penetration rate of appliances then? Less than 5% Source – Lighting Asia

9. Opportunity a Microfinance Institution offers- • Financial and Social intermediation • Provision of financial services to low-income clients, including the self-employed especially women • 95% MFI clients in India are women • Not merely banking but a development tool

10. Opportunity a Microfinance Institution offers- • Proven Model • Poor are credit worthy • Given the chance, people are capable of bringing themselves out of poverty • Economic independence is the crux of a larger social empowerment process

11. Opportunity a Microfinance Institution offers- • Unprecedented Reach • Total Client base of MFIs is > 25 million people • MFIs continue to focus on women empowerment • Focus on rural and backward districts of India

12. Opportunity a Microfinance Institution offers- • Cross Sell Capability • Successful Models of distributing – mobile phones, sewing machines, bi-cycles, refrigerators, solar lanterns • Training and capacity building internal teams • Linking the complete value chain – sales & after sales

13. What is a possible solution ? Credible and Reliable Energy Appliance Supplier Microfinance Institutions representing poor women

14. Opportunity a Energy appliance manufacturer offers- • Credibility of Working through Partnerships • Experience in working through large and small partnerships in government and private institutions • Understanding the ground field force i.e. Loan Officers equivalent manpower • Training, Demand generation, Local Logistics in both directions, Q&As

15. Opportunity a Energy appliance manufacturer offers- • Reliability of Product and its features • User friendly products that have proven their track-record of more than 5-7 years in India as well as globally. • Near to ZERO fault rate achieved even in stress conditions • Customer friendly after sales policies to cover the risk of purchase Years of Life

16. Opportunity a Energy appliance manufacturer offers- • On-Ground Support to hand-hold MFI field force • Understanding that product selling is not the core of microfinance institutions. • Require directions and hand-holding in the initial stages • Understanding that an MFI does not own the product and it will always remain the property of manufacturer.

17. Opportunity a Energy appliance manufacturer offers- • Uniform Pricing of products • In a multi channel environment keeping the product consumer price similar to that in the market • Strict control on price under-cutting by other distribution models so as to protect the trust between poor clients and MFIs

18. There is a possible solution ! Credible and Reliable Energy Appliance Supplier Microfinance Institutions representing poor women

19. There exist ways to effectively combine microfinance with renewable energies, especially in rural areas where access to energy remains limited Out of about 10,000 Microfinance Institutions (MFIs) serving worldwide more than 155 million clients, only 30 to 40 MFIs today offer energy loans.* * www.planetfinancegroup.org

21. Challenges from Manufacturer’s side Initial approach and Product Selection by MFIs • MFIs Initial Resistance : Fear of getting into product selling • Stick to core • Problems in bundling the energy product • Insecurity as the focus of loan officer might change • MFIs long drawn process of product selection: This could take weeks and months to arrive on 1-2 products • Product screening process through own guidelines • Price offered to MFIs given the most priority, than value proposition offered to end consumers.

22. Challenges from Manufacturer’s side Business Execution through MFIs • Business Modelling: MFIs testing new ways of product knowledge transfer and distribution • Keeping away the Loan Officers from this arrangement • Product knowledge to clients given outside of group meetings • Involving multiple entities in the value chain – eg: distribution points, energy officers, marketing agencies etc. • Awareness and Field Motivation: Lack of joint working between companies and MFIs for • Product Training and Sales training • Lack of reward and recognition • On-ground demand generation activities

23. LIVE Example One MFI in Bihar Total Client Base: 3 Lac Target in first 6 month: 20% penetration i.e 60,000 lights Step 1: Agreement on product quality and after sales mechanism Step 2: Agreement on Training & capacity building support. Step 3 : Agreement on Product Logistics and billing support Step 4: Make an attractive product, Plan a pilot in select branches Step 5: Establish targets and incentives for Loan Officers Step 6: Correction on Step 1-3 Step 7: Full Scale Launch Out of 2 crore HH in Bihar 1.6 Cr houses depend on Kerosene for lighting - Census 2011

24. What is on which side? MFI Branch d.light Product & Warranty Logistic Cost Customer Invoicing VAT Training Materials Capacity Building Product Return Logistics Free Replacement within 2 years Toll-Free Help Line Center Village Demonstrations Clients Customer Contact Loan Processing Loan Re-payment

25. What should we do? Manufacturers should provide the following: To MFI and Other Stake Holders Awareness – Availability - Accountability To Customers through MFIs Awareness – Affordability - Availability

26. Conclusion & Way Forward • Few Steps from MFI Sector: • Need to link energy & access to affordable finance since the poor have a significant impact on environment protection • Engage their Loan officers equivalent to have more discussions around energy initiatives • Few Steps from Energy Appliance Manufacturers: • Joint ownership of product distribution and demand generation • Focus of providing best technology at most customer friendly prices • Support MFIs in establishing pre & post sales value chain

27. d.light – A Brighter Future Join us as we transform the lives of 1 Billion people! 28