A major new $7.6 million initiative was launched today between the United Nations Environment Program (UNEP), and two of India’s largest banking groups to help 18,000 southern Indian households finance clean and reliable electricity from solar power. The UNEP program is made possible with support from the United Nations Foundation (UNF) and Shell Foundation.
In effect, Indian households will be able to purchase systems at an interest rate of approximately 5 percent compared to the normal consumer lending rates of 11-12 percent. The Syndicate Bank and Canara Bank have begun offering new low-interest loans under the UNEP program, which is aimed at ‘buying down’ the financing cost of photovoltaic solar home systems.
“This initiative helps to meet both environmental and development objectives by overcoming a major barrier to increasing the use of renewable energy – access to finance,” says UNEP Executive Director Klaus Toepfer. “Finding practical ways to improve the lives of the world’s poorest communities while at the same time protecting the planet is a guiding principle in sustainable development,” says UN Foundation President Timothy E. Wirth. “It is also a principle upon which the UN Foundation was founded.”
Many Indian households still rely on inefficient and polluting energy sources such as kerosene, which produces negative health, environmental and social impacts. In Karnataka, even where grid electricity is available, problems of capacity shortages and inconsistent quality plague the power supply. This has led households to look to alternative power supply systems such as solar or diesel generators. Despite high initial costs, solar home systems emerge as an attractive option in the context of costly or unreliable alternatives and escalating grid power tariffs and therefore a growing number of households are turning to solar as a matter of necessity and convenience.
But financing their high initial cost is a major barrier and one where southern India’s well-developed banking sector can play a leading role. Canara Bank and Syndicate Bank are credited with introducing many of the most innovative rural financial products in India. Each also finances group lending through linkages with Self Help Groups, and hence can advance loans to the poorest. The UNEP partnership will allow both banks to offer new loan products for the growing renewable energy sector through an extensive and established network of rural branches in the states of Karnataka and Kerala.
By combining two banks and a number of UNEP-qualified solar home system vendors, UNF President Tim Wirth says the program is a “market-driven approach designed to stimulate competition among vendors and ensure quality products, competitive pricing and reliable after-sales service”.
Shell Foundation’s President Kurt Hoffman says clean and reliable forms of energy “can improve access to education and communications, protect health and environmental values and promote economic growth – all necessary to alleviate poverty”. Hoffman added that such efforts will help to create a future of economic, social and environment prosperity, which is the core of sustainable development.
Background information and a color photo of a solar home system installation is available on request or can
be downloaded from www.uneptie.org/energy/Indian-Solar-Finance.
Background information on the UN Foundation and information about other UNF projects in India is available at: http://www.unfoundation.org.
The United Nations Foundation was created in 1998 with businessman and philanthropist R.E. Turner’s historic gift to support UN causes. The United Nations Foundation promotes a more peaceful, prosperous, and just world through the support of the United Nations and its Charter. Through its grantmaking and by building new and innovative public-private partnerships, the United Nations Foundation acts to meet the most pressing health, humanitarian, socioeconomic, and environmental challenges of the 21st century.