Eric Kissel, Microfinance Partnerships Manager for EIC

True confessions: all this green is starting to make me see red.  I like clean air and water, and am fairly frugal so conservation makes sense to me, but without a positive economic return I don’t believe many alternative energy initiatives can or should survive.  RFPs for projects which combine green energy and microcredit seem to be popping up more and more frequently, making my skeptic’s radar glow hot.  Can microloans for green energy products make financial and environmental sense?

Projects like Energy in Common give me hope.  Energy in Common has demonstrated both positive economic and lifestyle returns for its borrowers who invest in alternative energy, utilizing a Kiva-like platform to finance investments.  In order to get a better understanding of why and how it works (and hopefully pick up some how-to tips), I interviewed Eric Kissel, Microfinance Partnerships Manager for Energy in Common (EIC).

Hi, Eric.  So what exactly is this “energy poverty” I’ve been reading about?

Eric:  One-third of the people in this world still rely on rudimentary, polluting, inefficient forms of energy. Charcoal, dung and wood for cooking, kerosene for lighting – these are still common in much of the world.  Using this type of energy is more expensive than you would imagine. Families spend hours gathering wood and a significant part of their income is spent on products like charcoal and kerosene. 

I noticed in your bio that you learned about the relationship between access to credit and energy needs when you were in Bangladesh.  So what’s the relationship?

Eric: The families I spent time with in Bangladesh were forced to rely on dirty forms of energy until they were extended credit to pursue other options. Gaining access to modern energy comes with higher upfront costs than business as usual. Cash-poor families require access to cheap credit to be able to spread out the costs over time.  Over the long run an improved cook stove or a solar-powered LED lamp ends up being cheaper for them and more efficient.

Is it really cheaper and more efficient?

Eric: Absolutely. For example, two of EIC’s current partners – Christian Rural Aid Network and Toyola Energy provide solar-lighting kits using microcredit to tackle the high up-front cost. Toyola supplies solar-powered LED lamps and with money raised through Energy in Common, CRAN provides the financing.  A typical client in this part of Ghana spends about $10 every month on kerosene for lighting.  These solar-powered products are being sold for $45 for the basic model.  You can see how the savings will start adding up quickly.

How do these solar kits work?

Eric: They come with a panel and a lamp with different power settings. They also have an outlet so that, in addition to lighting, you can charge a mobile phone off of the system.  While their main use is for providing light for a client’s business or home after dark, users have realized that they can bring in additional revenue by letting their neighbors recharge their mobile phones for a fee.

I think it’s interesting that EIC is lending primarily to entrepreneurs – for the most part these aren’t consumer loans.  Why did EIC choose that route?

Eric:  The majority are for business use, but often, particularly with the improved stoves and solar lamps, the products are used within the home as well. The customer might take the lamp with them to their storefront, use it to extend store hours, and then take it home in the evening.  The same is true with the cook stoves– many are being used in a restaurant, which is often attached to their home.  Many women express that the improved stoves will help them save time and money acquiring wood and charcoal. EIC also features loans that are solely quality of life improvements for families. Most of the clients purchasing improved stoves cite health and safety high on the list of reasons for moving away from charcoal and wood in the home.

How long has EIC been around?

Eric:  Energy In Common has been built over the last year and our official launch was in March. 

You’re probably getting tired of being compared to Kiva, but lots of people know the Kiva model so… how does Energy in Common compare?

Eric: We have a similar model in terms of the person to person lending approach, loans being repaid to the lender, and then, ideally, the lender loaning money all over again.  We believe, however, that access to modern forms of energy is key to all development outcomes. EIC lenders exclusively fund green energy projects. These projects typically allow for extra income generation while creating tangible quality of life and health benefits.

Like Kiva, we accomplish this through strong partnerships with our MFI partners. For many of our MFI partners energy loans are a new kind of product. A lot of work goes into building strong ties between the MFI and the energy service provider.

Last, our focus on energy allows people to combat climate change AND poverty at same time. Every dollar that is lent through EIC funds a product that reduces dependency on polluting fuels.  Every LED lamp, every fuel efficient stove, and every solar panel purchased, not only makes life a whole lot easier for these communities, but greenhouse gas emissions drastically drop as well.

 What is EIC looking for in an MFI partner?

Eric:  Since our MFI partners are the ones who actually administer the loan at the local level it is critical that they have a strong reputation for good business practices. A strong presence in rural areas, straightforward loan products, and a willingness to innovate with energy loans are important. The real challenge that I’ve seen so far is finding MFI partners that have an established relationship with an energy service provider or that are willing to develop that relationship.  Creating strong bonds between the energy service providers and the MFIs is crucial – making sure there’s an understanding between both parties on the financing that’s involved, product costs, what the customer can expect, what kind of after-sales support there is, if there’s a warranty, and who’s on the hook if the product malfunctions.

It’s still a bit early in the game for EIC, but are there any lessons learned you’d like to share?

Eric: The practice of making clean energy available and affordable to the poor using microfinance is still new. Many of our MFIs have not entered into this sort of partnership before. Developing those strong partnerships I mentioned between MFIs and energy providers takes time and that has been a learning experience for us. But we are learning!

By Kirsten Weiss

About Kirsten Weiss

Integrating marketing and strategy to develop profitable, demand-driven institutions.
  • The sustainability of a financial service can be gauged by the sustainability of its beneficiaries. A couple of weeks ago I was in one of the lowest penetrated MF markets of Pakistan in Southern Punjab trying to assess the suitability of Suraj (Sun) Foundation’s products with the micro-entrepreneurs of the area. These rural areas are the worst hit by the ongoing energy crisis in the country. To my surprise, some of the locals have already researched on solar energy solutions but find them too expensive to buy upfront. And when they were asked if they would be willing to purchase these solutions in installments, the response was a clear YES.

    Even though it can be argued that client demand does not necessarily translate into sustainability, I believe that client demand coupled with positive feasibility does translate into a sustainable and viable financial product. Our market survey has shown that energy products are not only demanded by direct users, but they also like the idea of renting out their energy sources to neighbors to cover up on their own costs. Thus, the concept of group lease comes into play in such markets.

    Considering that increased productivity, efficiency and eventually income can be correlated with increased work hours through continuous power supply, I believe energy solutions can be fully sustainable. Most of the trading, manufacturing as well as services micro-enterprises are already using generators that cost much more than the estimated monthly installment of a solar energy lease. Local entrepreneurs have not only shown great interest but also willingness to pay higher installment sizes due to the much lower costs of energy once the lease amount has been paid off.

  • Green microfinance has plenty of potential, even though at first, the idea may seem shaky. One of the issues such MFIs face is convincing clients about the importance of green living – they don’t necessarily understand climate change – and therefore, one may think if it really is important to market green microloans as environmentally friendly. This is because these products are, more often than not, financially efficient. For instance, efficient cooking stoves, home solar systems and green farming practices.

    The additional benefit to the MFI is the possible entry into the CDM market, so the organization can earn extra money by selling carbon credits in the voluntary and compulsory markets, as Grameen Bank soon plans to do.

  • Kirsten

    I suspect that for the microfinance borrower, “green” takes a distant back seat to economics. If the borrower can make money off a renewable energy product, such as many of EIC’s borrowers seem to be doing with their cookstoves, etc., then there’s less to “sell.” And if you’re in a region where there isn’t a stable (or existing) electricity grid, it’s even easier.