EnDev Nepal is working together with the Alternative Energy Promotion Centre (AEPC) to improve the access of clean energy to the rural population through the development of a Micro Hydro Debt Fund (MHDF). The intervention aims to provide access to energy for rural areas while bringing the private sector into financing schemes.
The Fund is set up under the supervision of the AEPC, with EnDev technical assistance and placed at two competitively selected banks for its administration; NMB Bank and Himalayan Bank. Credits follow banks internal regulations and processes, so the fund can be part of the current banks portfolio of loans.
Projects are developed with close technical support and in cooperation with AEPC. Thus once the detail feasibility study is done and approved by Technical Review Committee, as well as financial estimations are made, communities that do not have the necessary up-front financial resources to cover their required own contribution under the GoN subsidy scheme, may apply to get a loan. Communities can apply to a credit with a low interest rate from our partner banks and close their financial needs. In some cases, LFIs can be involved as field partners of the banks and reach closer to the communities.
Besides providing financial support of the fund, the project creates linkages and develops capacities in AEPC, commercial banks, project developers and LFIs participating.
Once the loans have been repaid by the communities, the funds are used for financing further MHP sites.
Capacity Building for Partner Banks and LFIs
AEPC in cooperation with EnDev supports the commercial partner banks to develop appraisal processes for concerned loans. In addition, the LFIs can be strengthened to facilitate the loan administration in the field. The partner banks will be informed on potential project sites that have qualified for AEPC subsidies and are financially as well as technically viable. Furthermore, it proposes suitable local financial institutions (LFIs) that are close to the project site and could act as a local agent.
Capacity Building for Rural Communities
Alongside the existing support from both AEPC programs, rural communities which receive a loan from the partner banks, are strengthened in order to operate the MHP scheme in an financial and administrative sustainable manner. Besides operational training, the promotion of productive end-use of electricity is also addressed.
- Installation of approx. 1500 kW of additional generation capacity, with all the plants insurance covered.
- Providing 13200 households with electricity (approx. 73000 persons).
- Electricity access to 45 social infrastructure institutions and 55 rural businesses.
- Partner banks have the knowledge and practically proven that they can assess MHP projects in rural areas and select those which are viable for financing.
- Communities and individual entrepreneurs are trained on the promotion of productive end-use of electricity.
- Strengthening the cooperation between AEPC, project developers and national as well as local micro financial institutions (MFIs).
- Demonstration that lending to the rural micro hydro sector can be profitable and a commercially viable business.
The MHDF has played an important role to improve the access to credit for electrifying the rural population of Nepal which otherwise would delay the construction of MHPs and may not deliver the electricity on time. Currently banks are more familiar with lending to renewable energy projects and experience that it can be a profitable business.
The fund also served as an important experience based on which AEPC develop the CREF facility for giving credits to other types of Renewable Energy technologies.
By June 2017, 26 MHPs have received loans and benefited 7466 households, 125 social infrastructures and 152 MSMEs with electricity access through 965 kW installed.