Sustainable technologies: finding financing models that work

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Provide easy access to credit to make clean technology affordable for people on low incomes in developing countries

Poverty reduction and environmental sustainability are sometimes seen as separate issues, but often tackling one also helps to address the other.

Take cookstoves for example: dirty but cheap, they can trap people in poverty. Smoke inhalation from traditional cookstoves and open fires causes nearly 2 million deaths annually, with women and young children the most affected.

Other examples are solid waste disposal and kerosene lamps. All three have sustainable alternatives: clean-burning stoves, solar toilets and solar lights. Yet half of the world’s population – and 75% of south Asians – continue to burn solid fuels in traditional cookstoves, only 3% of Africans have bought a solar light, and take-up of solar toilets is low. There are many reasons why sustainable alternatives aren’t popular – and some are directly related to theglobal development community.


“Energy is the hidden issue, it’s amazing that the big NGOs don’t talk about it more”, says Steve Andrews, CEO of SolarAid, a social enterprise that sells solar lamps in rural Kenya and Tanzania. “In the UK, people spend less than 0.5% of the household budget on lighting. Whereas in Kenya it’s 15%, typically on kerosene … You can’t have development without access to energy.”


The difficulty SolarAid has in persuading people to buy a solar lamp is the initial cost. “An average Kenyan family in rural areas spends $75 (£46) a year on kerosene, whereas a solar lamp will last for four years and costs $40 (£25)”, says Andrews. “But the problem is our customers don’t have $40 and don’t have access to credit. That’s the fundamental challenge that we work with every day”.


It’s a problem many recognise. Martin Fisher is co-founderand CEO ofKickStart International, a provider of sustainable technologies to small-scale African farmers. The company’s irrigation pumps cost $35 (£28) and $100 (£62) and produce an average $200-300 (£124-186) profit from the first harvest alone. But as with SolarAid, his customers simply don’t have $35. “In general the challenge is cashflow”, says Fisher. “Financing for a rural farmer in Africa is something that no one has really figured out how to do cost effectively”.


To counter this, KickStart is piloting an innovative micro-payment system using mobile phones. “It’s something we call ‘cellphone lay-away’ – small-holders can make micro-payments over their mobile phone. Whenever they get a bit of money … little by little they pay for the pump, and then they can go to the shop and pick it up.” So far it has only been trialled on a small scale in Kenya, but already over 250 pumps have been sold this way.


Other well-known models exist, in particular micro-finance. In Bangladesh, Grameen Bank, BRAC, and ASA account for 85% of the country’s active borrowers and have helped bring clean energy to millions of people, in particular through solar panels. “That helps with the upfront cost problem”, says Camilla Toulmin, director of the International Institute for Environment and Development. “You pay back over a relatively short period of time and then the panel is yours. The panels often then produces energy for others in the community, for which the owner can then charge a small fee – it becomes an ongoing economic concern.”


One model that most parties now agree doesn’t work is handing out sustainable technologies for free. “Mobile phones didn’t spread across Africa because of aid, it’s because there was a value chain”, says Andrews. “We believe that the only way that solar lights are going to penetrate every corner of Africa, is with a market-based approach.”


Allen Eisendrath, energy division chief at USAid’s office of energy and infrastructure believes this requires a change in mindset for some in the aid community. “I think we’re in a transition from a donor-driven supply chain where we grant the equipment – which was a common programme in the past, such as our Amore programme in the Philippines with 40,000 connections to PV – to recognising that the private sector value chain in supplying clean technologies is critical. We have begun to work on the financing needs for example through leasing models.”


Camilla Toulmin also agrees that this should be the fundamental role of development agencies. “NGOs need to be demonstrating on the ground some of the different models that can work, both in terms of innovation in technology and also innovation in access … to act as a bridge or broker to potential sources of funding to a large number of small producers [and also] push governments to maintain the pledges that they make.”


SolarAid and KickStart both take donor money to fund education drives. SolarAid works with schools to promote $10 (£6) study lamps – the early adopters tend to come back to buy $40 (£25) lamps for the family, says Andrews. Similarly donor funds help KickStart teach farmers about the benefits of irrigation. “Only 4% of the farmland in sub-Saharan Africa is irrigated, compared to Asia where it’s about 42%”, says Fisher.


Meanwhile a study in July (pdf) found that 98% of Bangladeshis still use dirty cookstoves, and most do not consider smoke a serious health threat. If education programmes and access to credit are the ways towards a sustainable future for developing countries, then they still have a long way to go.

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