UNEP has launched a four-year 7,6 million USD effort to help accelerate the market for financing solar home systems in southern India. The project involves two of India’s major banking groups – Canara Bank and Syndicate Bank. Initially the effort targets the electrification of twenty thousand homes and small businesses.

The initiative provides interest rate buy-down to allow the partner banks to offer loans to customers at concessional rates of interest, Initially this will be 7 % below the prime lending rate, which is currently around 12 %. The loans are accessible to customers of established solar rural electrification companies. Four solar vendors have now completed the UNEP qualification process.

Some seven in ten rural households in India are still without access to electricity. They continue to rely on less efficient and polluting energy sources, typically kerosene. Even where grid electricity is available, problems of capacity shortages and inconsistent quality plague the power supply.

This has led households to look to alternative power supply systems such as solar PV. However lacking access to credit, most potential users cannot afford to pay up-front for a PV system.

One of the most attractive features of an interest rate subsidy is that it doesn’t distort the market, either in terms of the capital cost that the customer associates with a solar PV system, or the risk that a banker associates with a solar loan. The intent is that this will serve as a stimulus for the banking sector to include PV in their lending portfolio.

Information:

• www.uneptie.org/energy/act/fin/india/index.htm

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