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Ugandan Government Initiative to Subsidise Solar Power Equipment by 45% to be Implemented by Rural Microfinance Institutions (MFIs)

Guest post by: David Satterthwaite

Article Overview: The Rural Electrification Agency (REA) of Uganda, a semi-autonomous public-private partnership created by the Ugandan Government, has announced a 45% subsidy, up from the current 14%, on all solar power equipment. The subsidy will be will be promoted through a network of rural microfinance institutions (MFIs), and non-government organisations (NGOs), who will be providing a cash payout to those who install the solar systems, or a loan or a loan-offset.

Ugandan Government Initiative to Subsidise Solar Power Equipment by 45% to be Implemented by Rural Microfinance Institutions (MFIs)

The Rural Electrification Agency (REA) of Uganda, a semi-autonomous public-private partnership created by the Ugandan Government, has announced a 45% subsidy, up from the current 14%, on all solar power equipment. The subsidy will be will be promoted through a network of rural microfinance institutions (MFIs), and non-government organisations (NGOs), who will be providing a cash payout to those who install the solar systems, or a loan or a loan-offset.

The new policy is part of the solar power component of the Energy for Rural Transformation (ERT) programme, a 10 year plan that aims at increasing electricity access to rural areas. The programme is an initiative of the Ministry of Energy & Mineral Development and the Private Sector Foundation of Uganda (PSFU), an association of businesses, corporate bodies and major public sector agencies that support private sector growth, plus nine donor agencies. It is funded by the Rural Electrification Fund of Uganda, the World Bank (the international quasi-public bank), the United Nations Development Programme (the UN’s global development network), as well as MFIs.

Only 5% of Ugandan households have access to electricity, according to government figures and only 3% in rural areas, despite the formation of the REA in 2001. The target is to reach 10% by 2012.

So far solar power has made little headway in Uganda, as current devices are expensive, with the smallest solar lantern (5 watts) costing USD88-147 in a country where four out of 10 people live on less than a dollar a day.

Through the new scheme, private solar equipment suppliers will be encouraged to invest in rural areas, thereby meeting the ERT goal of achieving 80,000 new connections by 2010. In the past six years, the government has installed less than 10,000 solar systems.

Participating MFIs will receive credit lines from the REA, as well as direct subsidies for solar system customers (MFIs). There will also be grant advances for those wanting to enter the solar equipment market or to expand into it further. For customers there will be a one-stop application process for REA subsidies, public-private sector grants and credit from MFIs, using one consolidated application form.

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Article Tags: corporate bodies, dollar a day, donor agencies, global development network, microfinance institutions, mineral development, ministry of energy, power component, private sector growth, public bank, public private partnership, public sector agencies, rural electrification, solar equipment, solar lantern, solar power equipment, system customers, ugandan government, united nations development, united nations development programme



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