Micro-financed solar energy systems light up Bangladesh’s rural areas
Reaching for the sun
Two bone-rattling kilometres on a brick-cobbled road, beyond the market and the grid, past the flooded paddy fields lit intermittently by fireflies in the twilight is where the three Chowdhury brothers live, their homes awash in the white radiance of CFL bulbs. This is solar country, on the island of Mehindiganj in south Bangladesh.
Flipping through yesterday’s paper Hamid Chowdhury looked up and said, “Welcome to Mehindiganj.” In clipped English, he said he is satisfied with his solar home system (SHS), especially with the after-sale service of Grameen Shakti, the largest vendor in the country. An 80 Watts peak (Wp) system powers seven CFL lamps and a black-and-white TV in his six-room house.
All three Chowdhury brothers, former zamindars, are Grameen Shakti customers. Despite their obvious clout, there’s little hope that the grid, two km away in the Mehindiganj market, will reach their homes anytime soon. “Every year, the government promises the grid will reach us next year,” said Sirajuddin Chowdhury. There’s no economic rationale for the Palli Bidyut Samitis, cooperatives that manage rural electrification in Bangladesh, to extend the grid to areas with so few customers.
Diesel is expensive on the islands while kerosene lanterns only illuminate weakly. Electricity from solar panels powers lights and fans, recharges mobile phones, lights the family poultry farm— and allows them to watch an occasional Bollywood film on an LCD television set.
A simple plug-and-play technology, the solar home system is well suited to a country with 300 sunny days on an average. Home systems can easily meet the small needs of two-thirds of the 100 million rural Bangladeshis with no access to electricity from the grid.
Grameen Shakti, one of 32 Grameen social businesses, is perhaps the world’s fastest growing rural renewable energy programme. Since its inception in 1996 till November 2010, Grameen Shakti had installed 500,524 home systems across all 64 districts of Bangladesh. It installs 20,000 systems each month. Rural Services Foundation (RSF), an NGO, is a distant second with 94,482 installations till October this year.
On the island of Chormitua, across Mehindiganj, Grameen Shakti has targeted small traders, shopkeepers and artisans. Markets start late on these islands, a hub for hilsa fish, betel leaf and betel nut. Small crowds gather outside the general store-cum-tea stalls in the evenings to watch the lone Bangladesh TV channel on their blackand- white television sets. Illumination extends trading hours as fishers and agricultural workers stroll the market on their way home.
Rasul Mahmud, 22, who owns a small general store on the ghats is testing the limits of his 40 Wp system—he’s hooked up three CFL lamps, a black-and-white television set, a small fan, a mobile charger and a music system. He rents out one lamp to a tea stall nextdoor for taka (Tk) 10 (Rs 1=Tk 1.6) a day.
Grameen’s micro-utility scheme allows small shopkeepers, and fish and vegetable vendors to purchase up to a 50 Wp system on a 10 per cent down payment, with zero-interest loan repayment spread over 48 months. Under this scheme, SHS owners are required to rent the other solar lamps to their neighbours at Tk 5 to 7 per day per lamp. As of September 2010, the company had distributed more than 10,000 home systems under this scheme alone.
It made sense, Mahmud said, to switch from a kerosene lantern to a solar home system. Kerosene, like diesel, is expensive on the islands; it costs Tk 52 a litre, six takas more than in Dhaka. This is Mahmud’s second solar system—he had bought one earlier for his house. He cleared his loan in 36 installments of Tk 631 each; a framed certificate of ownership hangs in his shop.
The key to the programme’s success is the money saved by switching to solar —the company claims middle-income households save about Tk 800 each month, while low-income households save Tk 200.
Electricity is crucial for Mijanu Rahman, who owns a chemist’s shop in Bangla Bazaar, a 10-minute walk from the Chormitua ghat. Rahman’s basic medical training and a degree in pharmacy means he is de facto the island’s doctor, often called upon to diagnose (mostly stomach ailments) and to prescribe medicines (mostly antibiotics).
Earlier, traders in Bangla Bazaar depended on a diesel generator, paying 10 Tk per lamp each day. Rahman paid Tk 900 each month for his three lights; more than the Tk 600 installments he now pays for his 65 Wp system and a black-and-white TV.
Grameen Shakti muscled its way to the top despite the high upfront costs. It does not target the very poor, but the poor. The cheapest 10 Wp system, which can power two LED lights and one five-Watt CFL bulb, retails at Tk 8,800 in rural areas. After a 15 per cent down payment, it makes for an EMI of Tk 220 for a 36-month loan term.
Asking customers to pay about US $400 for a 40-Wp system is like asking a household with an average monthly income of US $60 to pay for 20 years’ worth of electricity bills in one go. Still, the social business turned a profit in four years, by combining micro-finance with efficient after-sale service and by involving local actors to keep costs low.
Customers can make a 15 or a 25 per cent down payment and pay the remainder on EMIs of a 36- or 24-month loan term respectively, and at a flat service charge (a more acceptable term than interest rate) that ranges from four per cent to six per cent. There’s a four per cent discount for those who pay the entire cost upfront. About 80 per cent of all customers buy systems on credit.
Grameen Shakti’s home system makes economic sense to its customers: purchase on loan against a small down payment and repayment in easy installments; loans extended without collateral; a buy-back option against the depreciated value of equipment in case the grid reaches the area; an efficient aftersale service; and if they so choose, an annual maintenance contract for Tk 300 a year that covers the post-warranty period. Grameen solar engineers also train customers on the use of the home system equipment.
The company has an extensive on-the- ground presence and service centre network of 1,159 offices staffed by 8,975 employees across the country. It serves three million people in Bangladesh. Solar electrified villages are easy to spot along the shoreline from the Barisal-to-Mehindiganj launch—TV antennae and solar panels fastened to the tall, storm-proof betel-nut trees that are plentiful on these islands.
Grameen Shakti has 1,400 customers in Mehindiganj alone, and another 40 customers, mostly shopkeepers and traders in and around Bangla Bazaar. The divisional office at Barisal, one of 13 in Bangladesh, handles all coastal areas in south Bangladesh and is an overnight ferry ride from Dhaka. The office of the divisional manager, Mukhlasur Rahman, is also his residence and a warehouse packed with batteries, PV panels and other solar components.
“Business is good,” said Rahman, pointing to the solar batteries being unloaded from a truck parked at the office entrance. This divisional office sold 3,000 systems in August alone. Employees are set daunting sales and service targets. “This is a tough job and the hours are long,” Rahman said late one evening after his daily meetin with office staff. “That’s because everything happens at our customers’ doorstep—marketing, selling, loan disbursement, after-sales service, and recovery of loans.”
Each system sold, when still under warranty, has to be serviced once a month by a Grameen Shakti solar technician for a period of three years. As about half of the solar home systems have been sold in the past three years alone, the human effort taken to visit about 250,000 households each month is mind-numbing. About five per cent of the company’s Tk 1,000-crore annual turnover is spent on its employees’ travel allowance.
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