Using Microfinance to Expand Access to Energy Services: A Desk Study of Experiences in Latin America and the Caribbean
This study documents the opportunities, challenges, costs, and effects of integrating energy products into an MFI's product mix. It describes the current situation for energy lending in Latin America and the Caribbean (LAC), and provides insights into successful strategies for energy lending. The research aimed to support innovative financial solutions for enhancing the usage and demand for modern and appropriate energy services and products that are simple, clean and affordable. The research indicates that:
- Untapped market for energy loans exists in LAC;
- Microfinance interventions are typically urban rather than rural;
- MFIs and energy companies face major challenges in piloting and scaling up lending for energy-related activities;
- Unsuccessful energy lending programs result from an inability to adequately anticipate and address market obstacles;
- MFIs do not demonstrate a strong portfolio of lending for energy related activities relative to potential demand.
The paper discusses ways in which MFIs and other stakeholders can address market challenges that constrain the expansion of energy lending. It states that energy can be embedded in community infrastructure and regular business loans. Donors can also support energy lending, but Government programs could be disruptive.
