The role of microfinance in energy access: changing roles, changing paradigms, and future potential

01.12.2015
When investigating the drivers and goals of both financial and energy inclusion, it becomes apparent that the two are mutually reinforcing concepts, which bear a high synergy potential. Nonetheless, screening for successfully scaled-up projects based on a combination of energy access and microfinance schemes provides very limited results which remain debatable. This paper provides an overview of the concept of linking microfinance and energy access based on case studies from Bangladesh, Pakistan, and Cameroon, as well as lessons learned from experiences in Mexico, Peru, and the Philippines, describing multiple approaches. It also tracks both sectors for signals of a transition process where roles and paradigms appear to be changing from both sides of the equation. From the microfinance perspective, there is a changing focus of impact investors toward environmental goals, while from the energy access side, a shift away from microfinanced solar home systems in the traditional sense to pay-as-you-go schemes, as well as both smaller portable systems and more elaborate service offers through different minigrid schemes. There is a mismatch in donor expectations and demand from the energy poor, much of which is due to the insinuated role that the microfinance support sector plays today in the field of energy access. This mismatch in both expectations and communication has in fact led to this scarcity of successfully scaled microfinanced energy programmes. The paper concludes with an estimation of future potential based on an altered perception and execution of a dynamic role of microfinance in addressing energy poverty.