Financing LED solar home systems in developing countries

About 1.4 billion people around the world still do not have access to the regular electricity. It is estimated that roughly 85% of the people without electricity live in rural, semi-urban or remote rural areas of the sub-Saharan Africa and South Asia. Although grid expansion is a vital objective of several developing countries and could be a long-term solution, the remoteness, isolation, low electricity demand of many rural communities, high investment cost of grid expansion make them very unlikely to be reached by the extension of the power grid. Consequently, the off-grid generation systems seem to be the most suited alternative to provide the electricity services to these isolated rural communities. home systems (SHSs) with Light Emitting Diode (LED) lamps are considered to be cost effective and robust decentralized option for rural electrification. Two financing schemes, fee for service and micro-credit system (ownership), are primarily important for acquiring the SHSs by the rural population. However, high upfront cost of SHSs and absence of payment flexibility is deterring the penetration into larger market of lower-income group rural population. Non-availability of facile finance to rural population at the grass-root level is the major barrier inhibiting the widespread adoption of solar-powered lighting systems. Micro-Finance Institutions (MFIs) can be useful to address the gap between the high initial upfront cost of SHS and low paying capacity of rural households by providing flexible and affordable credit. The One-Stop-Shop Model based on a single micro-energy provider who provides the services of finances, supply of standardized SHSs, and after sale energy services is crucial. ccess of the SHS program depends on the satisfactory technical performance, an adequate financing infrastructure, responsive after sales support, and the extent to which it can fulfill the needs of the end users of having grid quality energy.