Rural Electrification - A New Financial Product for Microfinance Institutions - Rural Electricity Loans

This paper examines the role that microfinance institutions (MFIs) can play in different kinds of markets to realize concrete projects. In particular, the paper studies the potential of MFIs for rural electrification projects, especially in the context of commercial markets.

The paper states:

• The rural population in developing countries is denied basic services such as electric power;
• An immediate change in the situation is difficult because of the huge investment costs;
• Financing schemes allowing payment by installments must be offered.

The study aims to identify appropriate types of MFIs for different kinds of market approaches on the basis of the case-studies of Morocco and Bolivia. Some of the important points listed in the paper about MFIs' participation in rural electrification projects are:

• It offers new market opportunities for MFIs, for example in the form of rural electricity loans;
• The MFI responsible for the financial flow could cooperate with a rural electrification company responsible for the technical flow - installation, operation and maintenance, and user training;
• As no substantial experience exists in involving MFIs in rural electrification, many aspects have to be analyzed.

The paper concludes that rural electricity loans present an opportunity for microfinance. However, it emphasizes that for the realization of concrete projects and strategic alliances, it is crucial to first analyze regions of activity, client structure, and product structure in microfinance.