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Microfinancing is fast becoming an effective vehicle to introduce clean energy products and services to developing countries, experts said at the student-organized Chicago Microfinance Conference on May 7 at Harper Center in Hyde Park.
India has taken the lead in developing green consumer goods for low-income households, according to Kalyani Iyer, a consultant who has worked with the biggest microfinancing institutions (MFIs) in China and India.
“Lots of start-ups in India are getting into affordable green technology, whether insulated blankets, solar porch lights, or water purification,” she said. “These start-ups are set up by young, recent MBAs either returning back to India or from India. There is a strong culture of social entrepreneurship in India. There’s a new company every day. They may say: ‘We have a product. Can we link it up with your MFI and make it accessible?’ So much is happening on an independent, entrepreneurial level.”
Iyer was among panelists who spoke at a session on “Microfinance Goes ‘Green:’ A Path Towards a More Sustainable Future.” The daylong conference was organized by Chicago Booth students in the Emerging Markets Group as well as the Harris School of Public Policy.
Iyer said the MFIs play a vital role in informing rural residents of the green products that are available. “That’s where the market is. In rural parts of the country, they don’t realize certain products exist. When they find out, they’re happy. Kerosene and fuel are very expensive, and an insulated blanket makes a big difference in life.”
She emphasized that MFIs only inform people about a product, but do not push clients to purchase them. “We have a demonstration and give them a pamphlet to take home. If they want it, they can start the paperwork. We find a lot of women are making the purchasing decisions.”
Iyer said a big obstacle in promoting green technology is persuading villagers that spending more now will save them a great deal in the long run. “They would rather spend a little bit every day on kerosene for instance, rather than put up 600 rupees ($13 U.S. dollars) for the up-front cost. We’re trying to help them change that practice, and microfinancing can play a good role in shaping those lifestyle decisions.”
Kira Costanza, founder and executive director of the nonprofit organization SunPower Afrique, agreed that MFIs can be platforms for education on clean energy and also provide the financing to make it happen.
“The largest obstacle to expanding solar energy is the high start-up cost,” said Costanza, who has worked tirelessly to bring solar energy to Togo, West Africa, where she ultimately hopes to power 18 locations with solar energy by 2020 and establish a model that can be replicated throughout the region. “People are scared of the initial investment. MFIs are one of the only mechanisms that can combat that problem by offering the start-up loans and the longer-term loans to actually install those systems. MFIs are critical resources in these communities. It’s a place where people come together, where they can learn, and where they have a lot of trust.”
The session was moderated by James Dailey, chief technology officer and cofounder of the Seattle-based MicroEnergy Credits.
—Mary J. Paleologos
Read what expert panelists said about how technology is transforming microfinance.