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5.2 Case Study 2: Enterprise solutions to poverty

Written by: Shell Foundation

Article Overview: Catalysing the pro-poor market for solar home systems

5.2 Case Study 2: Enterprise solutions to poverty

Catalysing the pro-poor market
for solar home systems

In recent years, the IDC has invested a great deal
of effort and money in supply-side initiatives to
stimulate the use of renewable energy by
developing countries. These have typically been of
the technology-forcing and supply-side subsidy
variety – often delivered via donor – or governmentdesigned
and managed interventions. There has
not been as much success as was hoped, though
some specific initiatives have worked well.

A different approach was taken in a renewable
energy initiative in Karnataka State in south India
in which Shell Foundation has been involved along
with United Nations Environment Programme
(UNEP) and United Nations Foundation. The
goal of the initiative – called the ‘Consumer
Financing Programme for Solar Home Systems in
Southern India’ – is to catalyse the market for solar
home systems (SHS) among the underserved rural
and peri-urban population in south India. It has
two unique features. First, the private sector was
extensively consulted about how the intervention
should operate. Second, the initiative is actually
being run on a day-to-day basis by Syndicate Bank
and Canara Bank – two of India’s largest banks
with extensive rural operations.

In the $7.6 million programme, donor money is
providing a small interest-rate subsidy to this bankrun
consumer loan scheme. The banks are
administering the scheme much as they do other
consumer financing products, but they have
received strong training, marketing and other
support provided by the approved vendors from
whom customers can extract the best deal and
system of their choice.

It has catalysed extremely rapid growth in the SHS
market (80% between start 2003 and end 2004
with 10,000 systems installed) and now accounts
for an average of 60% of new business being
secured by the four participating vendors. Over
time the interest rate subsidy to the banks has been
reduced but the success of the programme in
catalysing market growth will likely lead SHS
consumer finance to be greatly expanded by the
India banking sector, but on an entirely
commercial basis and involving no further donor
contribution

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  6.3 Come Together: Enterprise solutions to poverty
  2.0 Introduction: Enterprise solutions to poverty
  1.15 Building an employment agenda: Working Out of Poverty
  1.9 Building local development through cooperatives: Working Out of Poverty

Article Tags: India, renewable energy, Shell Foundation, Solar Home Systems, Southern India, supply side subsidy, United Nations Environment Programme UNEP, United Nations Foundation



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