Gaia is cooperating with MicroEnergy International, Swan Management and three Ethiopian microfinance institutions to initiate an innovative and replicable microcredit mechanism to finance clean energy technologies for households and small and medium size enterprises in Ethiopia.
The partnership, led by Gaia, collaborates to create a new credit product for three Ethiopian microfinance institutions. Instead of money, the institutions could offer clients clean energy technologies, e.g. solar home systems, improved cooking stoves or biogas systems, which can be paid in instalments after receiving the equipment, much like regular microloans.
Energy poverty is a major structural challenge in Ethiopia, setting considerable constraints to its economic development and poverty alleviation. Energy poverty is the lack of access to modern energy services, particularly in developing countries, where people are forced to use polluting fuels and spend vast amounts of time collecting fuel to fulfil their basic needs.
“Ethiopia has the world’s lowest access rate to modern cooking fuels, the lowest domestic electricity consumption per capita, and the lowest commercial energy use per capita. The demand for electricity is expected to increase dramatically but national plans to extend the grid will likely not be able to accommodate such growth. Biomass covers currently over 90 % of the total energy consumption in Ethiopia. But the extensive use of biomass has detrimental health and environmental effects,” says Chairman of the Board Pasi Rinnefrom Gaia.
The ultimate goal of the project is to utilise microfinance to enable income-generating activity among rural, off-grid, low-income customers and free them from concentrating solely on basic subsistence agriculture. This will improve their livelihood and generate new jobs. Once the model becomes established, it will improve the general access to energy in Ethiopia and contribute to a greener economy.
The project includes creating a business mechanism and developing the entire supply chain for high-quality, clean energy technologies for low-income markets. This comprises the design of credit products, logistics, post-sales services and monitoring. The project will also establish a business concept for the participating three Ethiopian microfinance institutions that have more than 130,000 clients. Once established, the business concept can be extended to other institutions in Ethiopia as well as to other developing markets with similar needs.
“This unique project aims to boost the development opportunities and solve the extreme energy poverty of Ethiopia without accelerating devastating climate change. The collaboration between Gaia, MicroEnergy International, Swan Management and the three leading Ethiopian microfinance institutions brings together global excellence with extensive local microcredit capacity,” says Pasi Rinne.
More information:
- Pasi Rinne, Chairman of the Board, Gaia Consulting, tel. +358 400 464 127, email: firstname.surname@gaia.fi
- Paula Tommila, Senior Consultant, Gaia Consulting, tel. +358 40 538 4813, email: firstname.surname@gaia.fi
