Micro-energy Lending:

Increasing Access to Energy for FINCA Clients via End-User Financing

March, 2011

Agenda

• Overview of FINCA• Client need and demand• Research Results from Uganda and Tanzania

• Results of pilot with SHS in Uganda* Operational approach* Client impact

• Approach for scale up

FINCA Mission and Vision

MISSION:

To provide financial services to poor entrepreneurs so that they can create their own jobs, raise household incomes, and improve their standard of living.

VISION:

A global network of sustainable financial institutions dedicated to meeting the financial needs of the lowest market niche.

FINCA’s Geographic Footprint

EurasiaArmeniaAzerbaijanGeorgiaKosovoKyrgyzstanRussiaTajikistan

DR CongoMalawiTanzania- 55K clientsUganda- 40K clientsZambia

EcuadorEl SalvadorGuatemalaHaitiHondurasMexicoNicaragua

FINCA HQWashington

DC

Latin America

Africa

AfghanistanJordan

Greater Middle East

Agenda

• Overview of FINCA• Client need and demand• Research Results from Uganda and Tanzania

• Results of pilot with SHS in Uganda* Operational approach* Client impact

• Approach for scale up

Current Client Energy Use and Expenditures- Uganda

• Clients spend 37-41% of their incomes on cooking fuel (wood or charcoal) and traditional lighting inputs (kerosene and dry cell batteries)

• Only 36 % of large loan clients, 31% of small loan clients have access to electricity in rural areas

Current Client Energy Use and Expenditures- Tanzania

CookingLightingWHAT ARE CLIENTS USING NOW FOR COOKING AND LIGHTING?

0

20

40

60

80

100

120

54%46%

11% 9%4%

1%

95%

50%41%

5% 3%

rural

urban

Based on 131 clients interviewed across 8 focus groups

Product Cost Lifetime Value: Warranty

Lantern: Solata/Firefly

22,500 ($15)30,000 ($20)

4 years Firefly has phone charging

1 yr

Lantern:Nova

65,000 ($43) 4 years Phone charging

1yr

Small SHS:PowaPack

160,000 ($107)

5 years Phone charging, 4 lights

1 yr

Products Tested in Market Research- Tanzania

Product Preference- Lighting

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

large SHS small SHS lantern nothing

Based on 131 clients interviewed across 8 focus groups

Agenda

• Overview of FINCA• Client need and demand• Research Results from Uganda and Tanzania

• Results of pilot with SHS in Uganda* Operational approach* Client impact

• Approach for scale up

Pilot Operational Model- Uganda

•SHS only for Pilot•End user financing+ awareness and training+ back-up after sales care•Specialized sales force •Partnerships with suppliers •Energy loan bundled with business loan

Pilot Results - Client Uptake

•550 loans

•70 cash sales

•98% would recommend SHS to neighbor

Children at a school using a solar home system sourced from FINCA Uganda

13Client Feedback Indicates Positive Impact on Health, Education, Savings

Impact on

Business

Impact on

Health

Impact on

Education

Impact on

Savings

* Based on a survey of 56 clients.

When asked about overall benefits from having an SHS:

•57 % of clients felt they had improved respiratory health•50% reported improved eye health •84% indicated that their children were able to study at night•91% saved on kerosene costs•82% saved on mobile phone charging costs.

14

Client Are Using SHS for Business Purposes

Client Feedback on Business Benefits of SHS

Kerosene cost savings 83%

Mobile charging cost savings 75%

Attracting more clients 67%

Longer operating hours 58%

Increased income 50%

Modern looking 42%

Expanding business 38%

Other 8%

No benefit 0%

Impact on

Business

Impact on

Health

Impact on

Education

Impact on

Savings

• 43% of FINCA Uganda clients surveyed use their SHS for business

• 22% have started a new business with the system, mostly by offering mobile phone charging services

• Others clients are using the systems for lighting in poultry or pig farming businesses, clinics, retail shops, schools, and salons.

Based on a survey of 56 clients.

15Impact Assessment Results Show Clients Feel They are Saving Money with SHS

Weekly Expenses Before and After SHS*

Weekly Kerosene Expenses

Weekly Mobile Expenses

Frequency before SHS

Frequency after SHS

Frequency before SHS

Frequency after SHS

No costs 0 26 3 53

Under 1,000 8 18 24 1

1,000 – 1,999 21 11 13 0

2,000 – 4,999 18 1 10 0

5,000 plus 9 0 6 2

Impact on

Business

Impact on

Health

Impact on

Education

Impact on

Savings

* Based on a survey of 56 clients; savings include transport costs

16SHS is more cost-effective for business vs household, but new products are cost effective for both

Impact on

Business

Impact on

Health

Impact on

Education

Impact on

Savings

10 W System for hh use

New Product- hh use•Cost is 20-25% of 10 W system•5W but same functionality as 10 W

20 W system for business use; charge up to 6 phones daily

Loan repayment (monthly)

60,000 UGS 14,000 136,000

Kerosine savings (monthly)

8,600 8,600 8,600

Savings on phone charging (monthly)

6,000 6,000 6,000

Revenue- mobile phone charging* (monthly)

80,000

Breakeven 17-18 months 4.5 months (within repayment period)

7 months

Ongoing benefit after breakeven (net of maintenance)

11,600 Assume no change 101,600

*Assuming 500 UGS per phone charged; 6 phones charged per day, 26 days per month)

Agenda

• Overview of FINCA• Client need and demand• Research Results from Uganda and Tanzania

• Results of pilot with SHS in Uganda* Operational approach* Client impact

• Approach for scale up

Approach for Scale Up

• Supplier agreements, FINCA sales force key to success

• Lower cost, standardized products

• Diversify products- cook stoves, lanterns, etc.

• Target more customer segments- business loans, innovative partnerships to reach energy entrepreneurs

• Explore savings-related services

A pharmacy owner using a solar home system for lighting

Thank You!