Solid financing of solar energy systems for commercial purposes
Whoever wants to invest in future technologies need capital. GBE Benin therefore promotes microfinance institutions (MFIs) and cooperatives so that they finance the rapid spread of solar-powered machines in Benin’s rural regions – with the help of the results-based financing (RBF) mechanism.
One of GBE Benin’s goals is to support farmers and businesses in rural areas in the acquisition of solar-powered technologies. However, because these machines and devices are often very capital-intensive, there is a need for financing models that work and, at best, help to develop a market for these future technologies.
At the end of 2020, GBE Benin therefore invited ten MFIs with experience in agricultural financing to a technical discussion. It turned out that most of them had already financed various agricultural facilities. But none of the MFIs interviewed had experience with renewable energy. The sector was considered risky by many.
With this experience, GIZ Benin now recently launched the RBF mechanism with the aim of promoting lending for the acquisition of solar-powered agricultural technologies. The mechanism encourages microfinance institutions to provide loans for the productive use of solar energy.
The subsidy is structured to encourage longer loan terms, simplified guarantee requirements, and the introduction of pay-as-you-go technology to encourage agricultural enterprises to purchase solar-powered agricultural machinery. The RBF mechanism encourages two types of financing: a seed fund for MFIs that have partnered with a solar company and launched their financial products, and a loan-linked subsidy for each loan extended to end users for solar-powered machinery.
After the first meeting, which was also attended by the professional association of microfinance institutions CIDR Pamiga, three microfinance institutions have now signed a partnership agreement with a solar company. All participants are very interested in working with the solar industry. Many see the RBF mechanism as timely and helpful in reducing investment risk and facilitating market entry.
The project also specifically promotes the participation of women in this sector. More information can be found on the website.