#UNCDFExpertsChat: Last Mile finance for Renewable Energy: Using Microfinance to Support Energy for All

  • November 06, 2015

  • Bangkok, Thailand

The energy sector is the largest contributor to global greenhouse gas emissions. At the same time, clean energy access is a major constraint for too many poor people.

Nearly 1.3 billion people are without access to electricity and 2.7 billion people rely on the traditional use of biomass for cooking in the world today. Where modern energy services are unavailable, people resort to expensive and unsustainable systems, which can exacerbate energy insecurity and leave communities more vulnerable to the effects of climate change.

#UNCDFExpertsChat spoke with Vincent Wierda, Programme Manager of CleanStart, about the promise of financial inclusion to support energy for all. Vincent is Programme Manager of CleanStart since early 2013. He has over seventeen years of experience in financial inclusion and enterprise development in both Asia and Africa and has an MSc in Economics from SOAS (University of London). He believes strongly in market-based solutions to development, but also in the role of public finance to address market gaps and failures.

#UNCDFExpertsChat: What is the development challenge you are trying to solve? How does UNCDF’s CleanStart programme solve that challenge?

Vincent Wierda: Access to clean and reliable energy, both for lighting and cooking, is something we take for granted on a daily basis. However, for hundreds of millions of people, this is not a given at all. Millions of women, both in Asia and Africa, have to walk for hours each day just to collect firewood for cooking. Millions of children have to do nightly homework by candle or kerosene lamplights. These are realities CleanStart wants to change, and with speed.

#UNCDFExpertsChat: What is the last mile financing model of CleanStart? How does it build public/private partnerships?

Vincent Wierda: Decentralized energy solutions require financing for low-income households and small businesses. CleanStart aims to build a market-based ecosystem where clients have choices in terms of what financing or payment tool they use to access energy.

This could be a loan from a microfinance institution to purchase larger cook-clean stove or access to a Pay-As-You-Go solar panel, where the client is participating in a more flexible lease-to-own arrangement.

Local agents and distributors also may require financing. It is at these levels that CleanStart is supporting financial and energy to provide sustainable solutions.

Somewhere into the future, we also hope to look specifically at collaborating with local public authorities. For example, if a local energy entrepreneur could make a credible power purchase agreement with a local school or clinic, this would lower the overall cost of investment in a larger energy system, potentially benefiting a larger community of households and small businesses.

#UNCDFExpertsChat How does CleanStart support the achievement of the SDGs?

Vincent Wierda: CleanStart is directly relevant to Goal 7: “Ensure access to affordable, reliable, sustainable and modern energy for all.”

But it does more than that, given the centrality of energy to our daily lives. For example, it supports local businesses through encouraging the growth of local energy distribution agents.

CleanStart also links energy access with innovation, such as the use of digital financial services: people might use their phone to pay for an energy service or asset, but they may also make more use of their phone to conduct financial transactions, if they have reliable charging available. A simple solar lamp with a phone-charging outlet can support this.

Moreover, improved energy access promotes better health and education.

#UNCDFExpertsChat: The SDGs have a strong focus on leaving no one behind. How does CleanStart reach poor communities and under-served regions in LDCs? How does it make sure that it reaches women and vulnerable groups?

Vincent Wierda: We encourage our partners, be it financial or energy service providers to target remote areas and vulnerable groups. We do this through targeted and performance-based support to innovative business models that work through local agents to distribute goods and services in a sort of franchise-type model. In addition, we track our client outreach carefully, using gender-disaggregated data.

#UNCDFExpertsChat: Can you give an example of how CleanStart has made a difference to the lives of poor people and communities?

Vincent Wierda: One outstanding example is that of Jeevan Bikas Samaj (JBS), a microfinance institution in Eastern Nepal. JBS has been highly successful in building a client portfolio by providing a one-stop shop service for their clients purchasing solar energy solutions—some in the remote foothills of the Himalayas. By June this year, over 8,000 clients have accessed energy solutions through JBS, and this is since early 2014. The number of clients continues to grow, most of whom are women. JBS promotes solar energy, but also clean cook stoves and biogas digesters.

#UNCDFExpertsChat: What's the plan for scale up? What can we look forward to in the future CleanStart?

Vincent Wierda: The potential for scale is tremendous, as clearly illustrated by some of the solar businesses now active in East Africa. However, there is considerable need to do more to build a pipeline of investible projects as well as to de-risk investment opportunities. CleanStart will continue to identify new partners both in finance and energy business that are willing to try innovative business models in new countries, market segments or isolated populations in order to build local economies. We are doing this right now in Uganda, Myanmar and Cambodia, where we are targeting at least eight new partners before the year’s end. In the near future we are also looking at Ethiopia and other markets in Sub-Saharan Africa.

#UNCDFExpertsChat: What's exciting about working in this space?

Vincent Wierda: There is a lot of dynamism in this space. People everywhere in the world recognize that we need to look at energy differently. With technology and new business models, its potential to make a real change in low-income households is tremendous with huge impacts on health and education. What’s also really exciting is how energy access, communications, and financial inclusion all come together and act as co-enablers, allowing people to integrate with the wider economy.


About CleanStart:

CleanStart supports low-income households and micro-entrepreneurs to jump-start their access to clean energy through microfinance. It encourages greater financing choices for poor people, supported by high-quality technologies and services, and enabling ecosystems for energy and financial service providers to achieve scale and impact. The UN Capital Development Fund (UNCDF) aims to invest resources in at least six countries in Asia and Africa to create a clean energy future for 2.5 million people. For more information, please visit www.uncdf.org/cleanstart and follow CleanStart on Twitter at @UNCDFCleanStart