The delegation led by UK Prime Minister David Cameron, which held talks with Indian business leaders last week, had some green ideas. One of these was a green bank that could finance renewable energy businesses. Will such a bank help small players in the interiors of the country or will it be confined to the big industries?
It may help entrepreneurs but not end users, who need financial instruments designed to suit individual buyers, which only a small local rural bank can do.
When a woman in a village in Karnataka bought a solar energy system from SELCO Solar Pvt Ltd, a social enterprise that provides custom-made solar energy products ranging from electric lights to sewing machines to rural consumers, she badly needed a loan.
There is no green bank in India or anywhere else. Nor are existing Indian banks green. None of their portfolios include loans for solar energy, despite India having launched a National Solar Mission with a target of 1,000 Mw by 2012 and 20,000 Mw by 2022.
So, this woman, who earned Rs 800 a month and wanted to buy a system worth Rs 4,000, was helped by SELCO in getting a loan from the regional rural bank (RRB), which helped her by accepting the payback in easy instalments. Of course, at a whopping 14 per cent interest.
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SELCO Managing Director Harish Hande says the company would not have survived without RRBs. Hande calls RRB managers power houses of knowledge, who know when a villager can afford a loan and how instalments should be timed to suit various rural occupations, weather conditions, and so on. Any green bank should have people with rural connect, he says.
SELCO has trained village-level entrepreneurs to repair solar systems supplied by the company in 18 districts of Karnataka. It is operating in Ahmedabad slums with SEVA Bank as partner. There are several enterprises like SELCO designing novel products for rural India and who have to enable the buyer with the means to buy. There is Vortex selling solar ATMs, Dlite selling lanterns, and, of course, NGOs like TERI selling lanterns. They draw from venture funds, from grants and to a very small extent from banks. But for consumers’ financial needs, they are mostly helpless as interest rates are not attractive.
According to Hande, green bank would be a wonderful asset as it would fund innovation. But what would really help and what was indispensable was creation of a space for renewable energy financing, both for the entrepreneur and the end user. We need energy inclusion as much as financial inclusion, says Hande.
Less than a per cent of banks’ slot of differential rate of interest for the poor is used today. If that is used to finance the renewable energy needs of the poor, that would be financial inclusion and energy inclusion in one go, says Hande.
The Ministry of Renewable Energy this month expressed concern at the lack of bank credit for solar energy and a meeting with bankers is imminent, indicating that the tunnel is lit up at the other end.