Energy and Gender for Sustainable Development: A Toolkit and Resource Guide

2.6 How Can Innovative Financing Schemes Expand Women’s Access to Energy? 5

Adapted from Gail Karlsson, Micro-Credit and Financing Schemes to Expand Access to Energy for Poverty Alleviation and Empowerment of Women, UNDP Briefing Paper (2003).

Financing May be Needed for Acquiring Energy Equipment

Small-scale, decentralised energy-related technologies and appliances could help relieve women’s daily burdens, especially in rural areas, and increase their economic and social opportunities, but one of the primary difficulties facing poor people is the lack of capital for acquiring these items. In some situations, equipment or capital grants have been provided by donors or through some combination of community participation, grants, and local government contributions. Recently micro-credit financing has emerged as a valuable tool for providing capital to poor people who were previously viewed as bad credit risks – especially poor women. Though there are limitations to the reach and effectiveness of micro-credit, in many cases it has been a useful approach, although the amounts available under this type of financing are often insufficient to purchase many small-scale energy technologies. So far, there has been only limited use of micro-credit schemes to finance energy-related technologies and equipment, but there is significant potential for small-scale lending to be adapted to meet women’s needs for affordable access to energy.

Women Face Constraints in Gaining Access to Credit

Most rural banks and lending institutions have conditions for lending, such as collateral and credit history requirements, that exclude poorer borrowers. These requirements generally have a greater impact on women, who may face legal restrictions making it difficult for them to own land or other assets or to take action without their husbands’ consent. They may also be discouraged from borrowing or engaging in business by social and cultural barriers limiting women’s activities and mobility and by illiteracy, which is more prevalent among women due to less access to schooling.

Micro-Credit Programmes Can Provide Financing and Empower Women

Micro-credit programmes, many of them modeled after the Grameen Bank in Bangladesh, have been used to address some of the constraints keeping women from gaining access to credit by offering small amounts of short-term working capital, which must be repaid at frequent intervals. Since most women have no assets that can be used as collateral, repayment is assured through a system that links loans to the members of a small group, so that all the members are responsible for the repayment of each other’s loans. Bank members are also usually required to keep a savings account. This system has resulted in very high loan repayment rates, encouraging expansion of the programmes. By establishing a credit history based on repayment of very small loans, women can graduate to bigger loans to build up their business activities.

Although concerns have been raised about whether women in fact retain control of the funds they borrow or whether their husbands end up using the funds (a concern that increases with the level of funding), there is evidence that many women have gained significant benefits from micro-credit programmes. The Grameen Bank in Bangladesh allows women who have successfully repaid three loans to graduate to larger loans for land purchases or home improvements, moving beyond the micro-level of borrowing. Since title to the property has to be in the name of the bank member, some women have actually been able to become legal owners of the family home.

Variations on Micro-Credit Programmes Can Help Poor Women Purchase Energy-Related Equipment

Adaptations to micro-credit arrangements to provide access to capital for energy equipment would need to involve larger loan amounts and longer time frames for repayment. Borrowers would generally need to be able to generate income from using the equipment for business activities and use the additional income generated, in part, to pay off the loans. Most lenders, and borrowers, however, are not familiar with energy technologies and need some capacity building in order to handle loans for purchasing energy equipment. Village savings and credit institutions already used by local people could be encouraged to expand their operations to include energy lending. They are more accessible to women because they are close by and less formal than commercial banks.

The Grameen Bank recognised the importance of energy financing and organised a special non-profit affiliate, Grameen Shakti, to act as a supplier of energy technologies – primarily solar home systems. Unlike the Grameen Bank, the Grameen Shakti finance programme is not particularly targeted towards women, and the customers are generally the wealthier members of the community. However, promotion of the systems for income-generating purposes, and adaptation of a credit scheme to reduce the down-payment requirements and extend the payment periods, could expand the market for the systems, bringing down costs and making them more accessible to women bank members and less affluent borrowers.

ENSIGN, a project initiated in 1996 by the Asia-Pacific Development Center and UNDP, was innovative in the way it coupled provision of energy services for the poor with promotion of income-generating activities financed by micro-credit. As it turned out, the majority of the borrowers were women who undertook a wide variety of productive enterprises.

With proper support and capacity building, community-based women’s groups and development organisations can also introduce energy alternatives and help in arranging financing. These sorts of activities can be particularly effective for women’s empowerment if they are combined with literacy and skills training, and business development assistance.

Collective mobilisation of resources can provide an alternative method of financing delivery of energy services, especially to rural areas unlikely to be connected to central power distribution systems. Renewable technologies such as wind and micro-hydro generators are generally too large for individuals to purchase by themselves, but may be affordable sources of electrical power for communities if they are purchased collectively, for example, the Mali multifunctional platform has shown such collective ownership of energy systems. Through savings programmes and credit arrangements, village banks, NGOs and micro-credit institutions can help mobilise the necessary funding.

Further Reading

“Energy as an Instrument of Women’s Economic Empowerment,” by K.V. Ramani, in ENERGIA News 5, Issue 1 (April 2002). Available online at http://www.energia.org/resources/newsletter/enarchive.html. The author argues that wealth creation is the only way for the poor to escape their socio-economic deprivation and that access to energy is a means of wealth creation for women. Using the findings of the ENSIGN project, which was implemented in several Asian countries, he states that micro-financing is a key for women to get access to energy. Women borrowers in the ENSIGN project were enterprising, creative, and creditworthy, and the project generated many economic and social benefits. He emphasises the need for establishing and strengthening linkages between energy, gender, poverty eradication, and micro-finance in future actions.

“Uganda: Gender Responsive Planning for Access to Solar Technology Through Establishment of Appropriate Financing Mechanisms,” by May Sengendo and G. Turyahikayo (2002). Case study for ENERGIA Regional Paper, Gender and Sustainable Energy Issues in Africa: Perspectives for the World Summit on Sustainable Development. Available online at http://www.energia.org/pubs/papers/wssd_africa_regpaper.pdf. Micro-finance institutions (MFIs) have a variety of strategies for addressing the barriers women face in borrowing from commercial financial institutions: targeting women with their credit programmes through consideration of women as a disadvantaged group; using alternative non-traditional security arrangements such as group guarantees to enhance women’s access to financial services and overcome gender inequality in the ownership of assets (such as land, houses, and other fixed assets) for collateral security; and linking the financial services they offer to clients, which is more attractive to women. Financing for solar PV equipment is a new item for most financing institutions. The project learned from the initial implementation phase, working with micro-finance institutions, and changed to using intermediary entities, in particular village savings and credit institutions (called village banks) to administer solar PV loans.

5. Adapted from Gail Karlsson, Micro-Credit and Financing Schemes to Expand Access to Energy for Poverty Alleviation and Empowerment of Women, UNDP Briefing Paper (2003)..