News

12.02.2011

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Thibault Lescuyer

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Grameen Shakti, the green microcredit success

In 1996, to almost universal indifference, Muhammad Yunus founded Grameen Shakti, a company specialising in equipping Bangladeshi rural areas, firstly in solar energy then in biogas. Today the social enterprise is a success story yet its business model has not been reproduced in another country.

In Bangladesh, the use of microcredit to bring renewable energy sources to the most disadvantaged is an idea that is gaining ground. In 1996, the Grameen Shakti social enterprise installed some twenty solar panels. In 2011, it sold 200,000 of them. Over that time, 700,000 panels have been bought on loan, providing families with lighting or enabling them to recharge their telephones, while saving on their kerosene purchases. This is a real bonus in a country where 70% of the population is not connected to the electricity network.

Grameen Shakti also supplies improved cooking ovens (147,000 in 2010) and biogas systems, with the help of the Grameen Bank, which provides microloans. This indisputable success is no doubt linked to “particularly favourable circumstances”, considers Marion Allet, permanent researcher at the CERMi (Center for European Research in Microfinance). In particular, three factors would explain this success: the strong local involvement of Grameen Bank, government support through the IDCOL programme devoted to solar power and Yunus’s driving force as a leader in social entrepreneurship.

Yunus, green microcredit front-runner

In 1996, Muhammad Yunus, who granted his first microloan 20 years earlier with his own money, decided to test solar panel installation in villages. Two arguments influenced this choice: the weakness of the electric network and climatic conditions. Bangladesh is a flat, tropical country, extremely vulnerable to global warming. It has even become the country in the world that is the most vulnerable to extreme weather conditions, according to a recent ranking from the Germanwatch organisation. By lowering CO2 emissions, solar panels are considered to be a means of fighting against imbalances in the weather, while helping to reduce the exclusion of populations deprived of electricity up to that time.

The future Nobel prize-winner started out by obtaining 16,700 dollars of funding from a private American foundation. With that money and advice from a few pioneers from the sector, he took on board three suppliers from the region – a Sri-Lankan company for the solar panels, a Nepalese one for the accessories and a Bangladeshi one for the batteries. This allowed him to equip the first twenty homes and identify the obstacles to be overcome before deploying the project on a larger scale.

The role of female “solar engineers”

Grameen Shakti quickly identified three major obstacles. First of all, the high price of equipment, which it was able to keep to a minimum by spreading repayments over two to three years and by offering a wide range of solar panels. Villagers also were able to stop repayments and hand back the equipment. “Very few villagers did so,” Muhammad Yunus already noted. The second problem was informing the villagers. On this point, Grameen Shakti can count on the support of thousands of enthusiastic employees of Grameen Bank and the increase in price of kerosene, which makes villagers more sensitive to alternative energy sources that cost less over the long term.

The third obstacle was maintenance. That was there women came in, as Muhammad Yunus explaines on the Grameen Shakti website. “We found a great solution by giving the responsibility to young village girls with some schooling. We gave them the name of Solar Engineers. They loved it and became proud of it.” The Nobel prize-winner regularly involves women in his projects. In fact they make up more than 80% of Grameen Bank’s borrowers. Is it so surprising then that they are the ones in charge of maintenance for Grameen Shakti? Not really, in a country where women often work on building sites. Today, Grameen Shakti employees 11,000 people, who are trained on the job.

Reproducing the Grameen Shakti business model

The company reinvests 100% of its profits and continues to diversify (biogas systems, supply of fertilizer, etc.). It also plans to install five million “clean” (i.e., non- poisonous smoke emitting) cooking ovens by 2015. One key question remains, especially for investors: can this model be reproduced elsewhere. According to the specialist company, Microenergy International, the answer is probably negative. “Energy solutions such as those developed by Grameen Shakti in Bangladesh cannot be deployed in the same way in other countries. They have to be adapted to regional conditions and to different players.” Indeed, no MFI, even a large one, has been able so far to create an equivalent “social business”. According to David Levaï, microfinance and energy expert with PlanetFinance, one of the reasons that this reproduction has not taken place is that Shakti’s model would be too much of a risk for many MFIs, who, for example, do not have the necessary technical expertise. In this case, the solution would be to go via partnerships, like those set up in India between several MFIs and the Selco energy provider.

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