Opportunities in Microfinancing Renewable Energy Services in Nepal

This paper examines MFI financing of renewable energy technologies (RETs) in Nepal. Access to adequate, affordable and environmentally benign energy is crucial to achieving the Millennium Development Goals and improving the lives of poor people across the world. Nepal's unsustainable energy use pattern has resulted in adverse impacts on energy security, environment and human health. There is an urgent need to substitute traditional fuels with clean renewable energy sources. The Government of Nepal is promoting RETs and also offering subsidies. MFIs can provide credit to the rural poor who are unable to pay the upfront cost for acquiring RETs. RETs have sound technology, a strong quality control mechanism and favorable economics that make them viable, reliable and bankable loan products for MFIs. Supply and demand side interventions that would help promote microfinancing of RETs include:

• Increasing awareness of technology and financing options;
• Promoting use of productive energy to increase income of the rural poor;
• Building capacity of MFIs, wholesale financiers and energy companies;
• Facilitating funds' flow from wholesalers to MFIs;
• Building working relationships among energy companies and MFIs;
• Lobbying for favorable policy environment.