Solar Home Systems: FINANCING

In every country, there is some form of rural credit, and farmers make payments for services and goods in multiple ways. What is constant, however, is that rural farmers are non-transient and are attached to their community and to their land; they are generally not credit risks because there is community, societal and cultural pressure to remain solvent, however poor, and to honor one's debts. This has been proven over the years by the experience in Bangladesh where the Grameen Bank realizes a 99% collection rate among its borrowers--who are the very poorest members of rural society. It is a fact that poor rural people pay their bills.

SELCO-India has achieved a 100% cost recovery rate in rural South India through a combination of payment schemes: using low-interest World Bank funds borrowed by SELCO to refinance farm cooperatives' collective purchases of SHS; providing SHS to farmers who borrow directly from branches of Indian banks (Syndicate Bank, for example, has 1600 branches, mostly in rural areas of the South) with the bank paying SELCO the full amount and undertaking collections themselves; and providing short-term credit and cash sales to farmers directly, with collections made by SELCO staff in the field.

SELF's pilot solar project in association with the Vietnam Women's Union confirmed the ability of apparently poor farmers in remote areas of the Mekong Delta to pay for PV. Their monthly remittances are forwarded to the district level, then to the provincial level, then on to Hanoi, where the local currency is converted to dollars to import more solar hardware from the U.S. Cost recovery in one province has been 100%. The Vietnam Women's Union reaches into every community in Vietnam.

Village solar cooperatives have been organized by SELF in Sri Lanka, where local managers collect monthly payments on 3 year hire-purchase schemes and remit the funds to a local bank. These revolving credit funds are then recycled by the community to purchase more systems. Collection rates in two SoLanka village projects in Sri Lanka averaged a less than 1% default rate after 3 years. A larger program in Sri Lanka, in association with a country-wide development organization known as the Sarvodaya Shramadana Movement, experienced a 95% loan repayment rate in its initial solar program sponsored by SELF.

SELF maintained a revolving credit fund for SHS in the farming areas of Gansu Province, China through its non-profit affiliate Gansu Solar Electric Light Fund (G-SELF). SELCO's joint-venture partner Gansu PV Company is manufacturing and marketing SHS to Tibetan Herdsman on a cash basis. (In Gansu Province alone there is a potential cash market of 150,000 unelectrified herdsman able to afford electricity.)

SELF completed a pilot project with Sudimara Energi Surya in Indonesia to study village solar service revenue collection. Cost recovery through Sudimara's Solar Service Centers, where people come to make their monthly payments, is over 99%. A late fee is imposed and collection agents visit houses directly within one day of a late payment; there are few defaults for the simple reason that people don't want their electricity "turned off" (i.e. their solar module or entire SHS removed).

SELF has proven that rural people in developing countries can and will pay for solar-generated electricity.

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A study for the U.S. government calculated that the gasoline equivalent of the energy saved over the lifetime of one 24-watt compact fluorescent bulb is sufficient to drive a Prius from New York to San Francisco.