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 (discontinued from 2020). 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 detailed 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 Government of Nepal subsidy scheme may apply to get a loan. Communities can apply to credit with a low-interest rate from our partner banks and close their financial needs. In some cases, Local Financial Institutions (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 Micro Hydro Project (MHP) sites.
Capacity Building for Partner Banks and LFIs
AEPC in cooperation with EnDev supports the commercial partner banks to develop appraisal processes concerning loans. In addition, the LFIs can be strengthened to facilitate 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 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 a financial and administrative sustainable manner. Besides operational training, the promotion of productive end-use of electricity is also addressed.
Role and Responsibilities under MHDF
AEPC along with Banks are the main implementation partner; NMB Bank is currently providing management/supervision of the MHDF revolving fund.
To steer the revolving fund, EnDev provides technical assistance to AEPC & NMB Bank for the operationalization of the revolving fund with the development of loan allocation and collection mechanisms, capacity building activities of Micro Hydro User Groups. Technical training and admin-financial training, organizational management training are provided to MHP mangers/operators through AEPC to operate as an independent rural utility.
- Provide electricity access to 30,000 persons.
- Provide electricity access to 20 social infrastructure institutions.
- Provide electricity access to 600 MSMEs.
- 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).
- Demonstrate 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. EnDev has supported 30 Micro Hydro projects in Nepal through the MHDF, which has led to banks familiarity 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.
*reported numbers as of December 2020