Financing access to energy

Access to energy and connected productive technologies have the potential to promote the economic development of local enterprises. However, financing productive use of energy (PUE) appliances, such as solar water pumps, mills or dryers, remains a challenge for small enterprises and rural populations in most countries in Sub-Saharan Africa.

More than 350 million people on the African continent do not have access to an account at a bank and are hence deprived of financial services. At the same time, the upfront cost of the equipment needed for productive energy use often exceeds by far the financial capacities of small entrepreneurs, especially in rural areas. In contrast to conventional diesel generators, photovoltaic systems have higher upfront investment cost, but very low operating cost, as no additional fuel is needed. The upfront investment is a challenge for people with low income and no collaterals, which would reduce the risk for financing institutions in case of a payment default. Also, comprehensive data on the creditworthiness of potential borrower are missing, which is an additional risk to lenders.

The lack of knowledge about decentralized renewable energy systems increases the perceived risk. Since finance institutions, consider financing productive use of energy as risky the interest rates proposed are high and jeopardize promising business cases for many users.