The main problem with programmes aimed at promoting solar energy is getting consumers to make the initial investment, that's usually quite large, needed to install the system.
This is particularly true of rural households that need cheap energy but have no access to any kind of finance, including bank finance.
Sensing a business opportunity here, Bangalore-based Selco Solar Light Private Limited came up with an innovative system of arranging finance through the network of regional rural banks.
In the process, it created India's first sustainable rural service network, which helps rural households access solar energy. It has, till now, installed solar lighting systems in over 65,000 rural households in Karnataka and Gujarat.
Selco, founded 12 years ago by Harish Hande, an IIT Kharagpur graduate, has tied up with grameen banks like Karnataka Vikas Grameen Bank, Pragati Grameen Bank in Bellary, Syndicate Bank and Canara Bank in Karnataka and Sewa Bank in Gujarat to fund the solar energy systems for rural households and slum dwellers.
A standard solar light system for a rural household costs between Rs 18,000 and Rs 19,000 with a maintenance fee of Rs 175 a year. While Selco supplies solar lighting systems, the banks provide the finance.
The interest rates are worked out differently for each buyer depending on his capacity to repay the loan. The loans are repayable in three to five years, while the standard solar energy kit supplied by Selco lasts about 25 years. The default rate is said to be 9 to 11 per cent.
Hande, managing director of the employee-owned company that generated a revenue of Rs 14 crore last year, is a doctrate from the University of Massachusetts, Lowell, USA in Energy Engineering (Solar), specialising in 'solar energy for developing countries'.
Hande set off with a Rs 35 lakh (Rs 3.5 million) loan from Winrock International, a non governmental organisation based in Washington. Later, he raised venture funds of about Rs 7 crore (Rs 70 million) from different sources.
Hande firmly believes that if the finance schemes do not match the ability of the consumer to pay, then the product becomes unaffordable. "Look at a street vendor who earns on a daily basis. Just because her cash flow does not match the needs of regular financing we bracket her as being unbankable," he says.
Selco works with organisations that create daily financing mechanism like micro finance. For example, slum dwellers of Ahmedabad are financed by Sewa Bank, which offers daily finance schemes to people buying solar lighting systems.
Apart from solar lighting systems, Selco supplies lighting kits to midwives, rose pluckers, salt workers in Kutch, tobacco farmers, roadside eateries and home-based workers. It now plans to design lighting kits for silk reelers, cotton farmers, cobblers and pickle makers.
Besides this, Selco has also helped people to start their own enterprises. A mid-wife in Ahmedabad bought solar light kits from Selco in bulk and now rents them out to a dozen other midwives on a daily rental basis.
With the successful implementation of solar energy system in over 65,000 rural households, the company is now taking a major step in adopting two or three newer technologies for cooking and heating water. It aims to light up two lakh rural houses by 2010. A bright energy efficient future awaits.
